Overseas Enforcement of Judgments

Raja Haji Fisabilillah Monument, Tanjung Pinang, Indonesia… right in the SIJOR Triangle. Achmad Rabin Taim via Wikimedia Commons.

A client emailed me the other day, asking how to serve a foreign defendant.  A pretty common occurrence that prompts either a “take a look at this blog” reply or a short & sweet rundown on what they need to do.  It comes up pretty regularly, and there’s really no good answer for it:  how do you best serve a defendant that isn’t in a Hague country? 

The answer that I quickly dashed off …  “forgive the law school answer here, but it depends“, followed by some brief detail.  One of the double-edged swords of the Hague Service Convention is that (on one hand) it provides certain, specific avenues to service, but it also (on the other hand) frequently limits those avenues.  Sure, a considered analysis is needed for serving defendants in England, France, and Canada.  But Mexico, China, and India… there’s one way to do it—period.

But what of those non-Hague places?  Well, a whole bunch of important questions will determine how to best serve.  For the purpose of illustration, let’s say your defendant is in the SIJORI Growth Triangle—an industrial compact of sorts, between Singapore, Malaysia, and Indonesia.  I pick that area because it’s seen a massive growth rate in recent years, and because all three countries lie outside Hague.  Let’s also say you’re in federal court, just for the sake of a simpler illustration.  Rule 4(f) will govern how you serve regardless of the defendant’s overseas location.

The bunch of questions:

  • Do you have an address for the defendant?  If not, find one.  Seriously—that is the ultimate threshold question.  I can’t help you if you don’t have this critical piece of information—although, I can help you find it.
  • (For rhetorical purposes…) Is the destination country a Hague Service Convention member?  Not in our illustration here, but if it were, the next question would be “do they object to Article 10?”  Set that aside for this discussion.
  • Where are the defendants’ assets?  The absolutely critical point, because if you have to go offshore to enforce a judgment, one of the very first things a foreign court will look at is the manner in which the defendant was served, and if they find it inappropriate, you’re done.  This makes perfect sense—because if they can reject an enforcement action on procedural grounds, they can avoid the tall weeds of substantive law.  [If the defendant has U.S. assets—or even Canadian or British assets—you can rest a bit easier.]
  • Does the defendant speak English?  If it’s an entity doing business in the U.S., it will be presumed competent in English.  But an individual… not so fast.  You may have to translate into Malay or Bahasa or any of a number of different dialects, to ensure that the defendant’s due process rights are respected—regardless of how you serve.  If the defendant isn’t in an English-speaking country, you may have to translate whether it’s an entity or not.  So be sure to keep things brief; federal court is a notice pleading venue, after all.  You don’t get paid by the word, but translators do.
  • How much is this defendant’s involvement really worth?  That will determine whether a more costly method (Letter Rogatory, local counsel…) is warranted, rather than simple mail service, or if the whole analysis is a waste of resources.
  • Is service by mail actually viable?  I’m not a big fan of mail service except in the rarest of circumstances.  It’s usually a bad idea.  But if the defendant has a history of actually allowing its employees to sign for FedEx or UPS deliveries, you’re probably going to be okay.
  • Does the law of the destination state prohibit service by mail?  This one’s doubtful outside the Hague list—but if the other country has a statute or caselaw that forbids mail service, it violates 4(f)(2)(C) [“unless prohibited by the foreign country’s law”].
  • Does the destination state prohibit personal delivery?  This one is also doubtful outside the Hague list, but again– if the other country has a statute or caselaw that forbids mail service, it violates 4(f)(2)(C).  In most civil law jurisdictions (essentially, everywhere that wasn’t once a British colony), service is a sovereign function or reserved to a guild monopoly.  You can’t necessarily just hire a guy to walk up to the defendant and hand him the documents.

It should be apparent that there isn’t an easy answer to the question, so the SIJORI defendant– whether in Singapore or Malaysia or Indonesia– necessitates some anaylsis.  To be sure, this isn’t an exhaustive list—but the ultimate point is that if the defendant doesn’t have accessible assets, you will have to enforce the judgment abroad, so that procedure should always be foremost in your mind when deciding how to serve.

“Just mail it” could be the worst thing you can do.  [Oh, and if you do decide to mail it, do it the right way!]

 

Intermediate People’s Court of Wuhan City

This past weekend (Labor Day), the wires were abuzz with excitement– in transnational litigation circles, anyway– about a Chinese court’s unprecedented  enforcement of a U.S. judgment.  READ THAT SENTENCE AGAIN.  Really.  I’ll wait.

Yes, folks.  A court in the People’s Republic of China was handed a decision from a court in the United States of America, was asked to recognize & enforce it, and responded… um, okay.  Yeah, sure.  Pay up, defendants.  

You would have thought the world turned upside down.

The scoop came from Dr. Jie (Jeanne) Huang, Senior Lecturer in Chinese International Business & Economic Law at the University of New South Wales on Sunday.  Transnational litigation nerds like me went berserk.

Holy enforcement of judgments, Batman!  We’re going to win!  FINALLY, THE SUN IS COMING OUT!

Whoa there.  Not so fast, says Dan Harris.  For the record, Dan is my go-to guy on all things Chinese.  If somebody tells me turn left down a street in Beijing and Dan says to go right, I’m going right.  Well, his blog yesterday afternoon is a must-read for anybody who, like me, saw a glimmer, a sparkle, that would open the skies and lead to a deep, dark Coppertone tan.  It ain’t the bright ray of sunshine that we’re all hoping for.  It’s  a lot like that seems-to-be-on-all-fours case you find on Westlaw that makes your heart skip a beat… until you Shepardize it and realize it’s so fact-specific that it has no possible bearing on the argument you’re scraping together.

I would paraphrase Dan’s post, or try to distill it down to something soundbytey (yes, I made up that word).*  That would not even scratch the surface, so allow me to direct your attention to China Enforces United States Judgment: This Changes Pretty Much Nothing in its entirety.  Put another way…

Dan Harris is Batman.

* Soundbytey.  Adj.  Of or related to a soundbyte, a quip or quote that is easily cited by lazy journalists for simplification and understanding by the masses.

UPDATE:  Ted Folkman takes a more optimistic, though cautious, view, in this morning’s Letters Blogatory.  Ted sees that glimmer of hope, but also cautions that “it’s probably too soon to change strategies when doing business with Chinese firms or nationals.”  He’s certainly right there.  An important takeaway from today’s LB post looks at the apparent inapplicability of the Hague Service Convention to the case; perhaps the Chinese are willing to defer to the law of the forum with regard to service.

JLPC via Wikimedia Commons.
JLPC via Wikimedia Commons.

To most American lawyers, service pursuant to the Hague Service Convention means filling out an inscrutable Article 5 request form, putting a jumble of paperwork into decipherable order, and mailing it off into some black hole bureaucracy in a far off land.  In some cases, that’s exactly what it amounts to, and this is why I have a practice.  Really.

But much of the time, a litigant is better off using Article 10(b) channels to effect service.  They’re no less effective, they’re usually quite a bit quicker than the Article 5 channel, and often do not cost much more to use than that inscrutable form.  In France, Luxembourg, Belgium, and even Québec, the Huissier de Justice is the route to speedy and effective service.  The counterpart to the huissier in the Netherlands is the gerechtsdeurwaarder, and they serve a substantially similar function (I use the term huissier from here to apply to both– merely for simplicity).*

For reference:

Article 10.  Provided the State of destination does not object, the present Convention shall not interfere with (…)  b)  the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination (…) .

In short, a lawyer in the US can directly hire a huissier or gerechtsdeurwaarder to serve process in countries that do not object to Article 10.  Applying to the Central Authority under Article 5 is superfluous… you may as well just cut out the middleman, because the Central Authority is going to hand the request off to a random huissier for execution anyway.

But beyond speed, what is the benefit?  Simply put, control.  If you hire a judicial officer directly, you determine who handles the documents, you reduce the number of hands they pass through (and thus reduce the chance for error), and you can prevent ineffective service because the person working the job doesn’t know what law you need to apply.  I’ll elaborate momentarily, after a bit of explanation of what a huissier actually is.

First and foremost, a huissier is a lawyer– a fully trained attorney who has chosen a specific career track in a specialized field.  In civil law jurisdictions, lawyers don’t just choose between transactional and trial work or between criminal and civil.  Very early in their career progression (perhaps even while in law school), they’re tracked.  Some become administrators, some transactional attorneys, trial lawyers– even judges– very soon after law school… and some choose the huissier track.  Depending on the country, huissiers may have a statutory monopoly on service of process functions, the drafting of conveyances & deeds, and the execution of judgments (think seizures, like walking into a bank and pulling all the money out of a losing defendant’s account).

If an American lawyer can directly hire one of these folks to serve, then we aren’t always subject to the luck of the draw.  It’s usually all up to us.

  • In the Netherlands, we can avoid the erroneous application of an EU requirement that ALL pleadings be translated into Dutch (they don’t necessarily have to be).
  • We can actually communicate with the person serving process to ask that they not serve a dissolution action on a respondent by handing the documents to the petitioner’s teenage son (this actually happened… “um, Mom, are you and Dad getting a divorce?”).
  • Fortunately, service by huissier is not substantially more costly than going through a Central Authority.  In many cases, it is my primary recommendation, and in some cases, my only recommendation.
They're definitely not this creepy guy.
They’re definitely not this creepy guy.

Don’t let the fancy titles fool you– these folks are just lawyers, like you and me.  And for the most part, they are incredibly gracious, cordial, and professional.


* Germany, Austria, and German-speaking Switzerland likewise use deurwaarders (in francophone Switzerland… huissiers), but those countries object to Article 10 entirely, so discussion here omits them.  I include Austria in the Article 10 objection on an anticipatory basis– the HSC hasn’t entered force there yet, but I am 99.44% certain the Austrians will join their closest neighbors in objecting to Article 10.

I’m not a fan of arbitration, as a general rule—especially in consumer contracts.*  That said, arbitration is far superior to litigation in many situations, and for many reasons.

In tort, not a good idea.  Certainly not an appropriate venue for a family law dispute. And consumer contracts?  Just… no.  Only the vendor benefits.*  But arbitration is definitely worth considering in global business and investment.  All of the parties involved have the benefit of counsel—or at least, they should avail themselves of counsel—and they are sophisticated enough to recognize what it means to be bound to a decision.  Or at least, they should be…

Some benefits of international arbitration:

  • It’s far cheaper than litigating a dispute.

    Judge Haller has zero tolerance for your crap.
    The Honorable Chamberlain Haller has zero tolerance for your crap, Mr. Gambini.

In arbitration, the parties pick the rule book. Good luck convincing Judge Haller that he should yield to your client’s preferences as to how things get done in the hearing.

  • Decisions are made by specialized neutrals who are selected by the parties. Honestly, if I’m litigating a contract dispute over drilling rights in the North Sea, I would much rather have the case decided by a specialist than a former prosecutor who got appointed to the bench because he was the governor’s roommate in law school.
  • Depending on the arbitral body, the process looks more like the inquisitorial system used by civil law jurisdictions. This makes enforcement far more likely in those civil law jurisdictions.
  • The process garners more respect from laypersons in civil law jurisdictions, for the same reason.  Consequence: they’re more willing to abide by the decision.
  • Two variations on that… losing parties can be more confident that they didn’t get hometowned, and are more likely to pay on the judgment because punitives are a rarity (remember that parties choose the rulebook!).
  • Sensible evidence production is more likely, again for the same reason. That is, when the arbitrator demands evidence, the parties can’t refuse without seriously harming their chances.  They also won’t just throw everything into a box for the other side to sort out.
  • Arbitral awards are more acceptable to foreign courts if the losing party doesn’t pay up.  Awards won in U.S. litigation… much harder to enforce.  [This is the big one…  it’s critical that you get enforcement, lest the whole ballgame be blown.]
  • We have a treaty basis for cajoling those countries who won’t enforce arbitral awards. The New York Convention on Arbitral Awards (1958) has been acceded to by just about every country we trade with.

Now, to be sure, it isn’t always the way to go.  Dan Harris argues, quite lucidly and from much experience, that arbitration clauses are a waste of time in Chinese contracts.  Despite China’s accession to the New York Arbitration Convention , they don’t follow through on their obligations to enforce awards.  Accordingly, Dan continues, the best thing you can do in China is choose (1) Chinese courts as the venue, (2) Chinese law as the controlling doctrine, and (3) Chinese as the operative language of the contract.

But China is one country.  One.  And, while it’s a biggie, it still isn’t our biggest export market by a long shot.  That distinction still lies with those polite, friendly folks to our north.  The home of Wayne Gretzky, SCTV, and Diana Krall (with whom I am in love, much to Peggy’s amusement and unbeknownst to Elvis Costello—or Diana Krall for that matter).  But I digress.  Mexico buys twice as much stuff from us than the Chinese do.  If you consider the European Union a single market (let’s not argue about that here, m’kay?), they beat China, too.  The only reason China tops the list for total trade: we buy four times what they buy from us.

Point is, our biggest trading partners—China excepted—believe in arbitration, and their courts are far more likely to compel a losing party to pay on an arbitral award than on a verdict.

 


* Forced arbitration clauses in consumer contracts are sinister.  Evil.  Downright rude.  While I can’t say that AT&T Mobility v. Concepcion was completely wrong, I do think that five of the the Nine Wise Souls dropped the ball.  Setting aside all the arguments about Congress occupying the field in interstate commerce with the FAA, they should have given more weight to the policy argument that goes like this:  class actions benefit society not because they make plaintiffs whole, but because they make defendants think twice about behaving badly.  It makes them think twice because, (1) punitive damages are rare, and (2) the publicity of a class action is harmful to their profitability.  But arbitration is usually a private affair, and damages are limited.  Maltreatment of a customer by a cellphone provider, cable company, airline, (insert player from random industry here)… used to be a costly thing.  Not only did the vendor have to write a large check, their clientele knew about it and judged them accordingly.  Now?  Individual claims only.  All hush-hush.  A massive waste of time for the aggrieved party, so they just suck it up and deal with it.

Not only is this not beneficial to the public, it’s harmful and it’s shameful.

 

My parents divorced around the time I finished high school.*  The court ordered Dad to provide support to Mom for both me and my sister as long as we were full time students, even in college.  I finished my bachelor’s degree about the same time my sister finished high school, and the old man decided he was done writing checks altogether; it didn’t matter that she was about to start college herself.  He wasn’t so much a deadbeat dad as he was insistent that his obligation was fulfilled (and that he knew more about family law statutes than the judge did).  The Child Support Recovery Unit saw things differently, and he drew a federal pension, so garnishment was pretty straightforward.

Child support recovery isn’t as straightforward when the “debtor” parent leaves the United States.  It’s downright impossible if s/he goes to a country that views parental obligations in a dramatically different way than ours does.  International child support enforcement is an exceedingly tough nut to crack, for a hundred different reasons.

But at least some help is on its way.  The Hague Child Support Convention will enter into force for the United States on January 1, 2017, so a mechanism will be in place soon thereafter for the enforcement of support orders (as well as alimony orders, under certain circumstances).  We can’t ascertain as yet precisely how the United States will administer requests under the treaty, but keep an eye on this space for an update once details are published; all indications are that the Department of Health and Human Services will be the designated Central Authority, but procedural details are sketchy.

With the exception of Burkina Faso (look it up—that’s a fiercely proud country right there), the treaty is only effective between the U.S. and Europe, but that just happens to be where a significant number of non-custodial parents live.  Of course, that doesn’t help with Asia, Latin America, or the vast majority of Africa.  But it’s a start.

 


*This is a hot-button issue for me.

[Originally published at vikinglaw.us]

Simple practice tip: if your defendant is located in Hong Kong, be sure to refer to the jurisdiction as Hong Kong, China or, alternatively, Hong Kong S.A.R. (shorthand for “Special Administrative Region”).  Any request which refers to Hong Kong in isolation, and is submitted to the Hong Kong Central Authority for the Hague Service Convention, will be rejected as a matter of course.  Hong Kong government officials are particularly wary of showing any offense to the government in Beijing, and they insist on this nomenclature out of abundance of caution (aside: I truly wonder if Beijing even cares, but it is not for me to judge).

When Hong Kong ceased to be a British colony and returned to Chinese rule in 1997, the Chinese left the common law system of justice in place along with the United Kingdom’s general view of the Hague Service Convention.  While China limits Hague channels to only Central Authority requests, the UK declarations also allow service by postal channels and via solicitor.

Service effected by a solicitor does not require such linguistic fastidiousness* on the part of plaintiff’s counsel.  But it is still wise to draft pleadings with care—especially if an enforcement action might someday be necessary in Hong Kong.  Imagine the knot in your stomach immediately following this opinion from a Hong Kong court:  “while we may find merit in the petitioner’s request that this Court recognize the judgment of the United States District Court, we must nonetheless decline to hear the matter because the original U.S. pleadings attempt to elevate the Hong Kong Special Administrative Region to the status of a sovereign state.”

All that effort to litigate the claim… vaporized over a seemingly trivial issue.  Yet the Chinese culture demands saving face, and linguistic status matters greatly.  Hong Kong necessarily shows deference to Beijing, so U.S. and Canadian lawyers must do likewise.

* I looked this one up on www.thesaurus.com.  Seriously.

[Photo by DAVID ILIFF. License: CC-BY-SA 3.0,  Accessed at  https://commons.wikimedia.org/wiki/%E9%A6%99%E6%B8%AF#/media/File:Hong_Kong_Skyline_Restitch_-_Dec_2007.jpg ]

[Originally published at vikinglaw.us]

My newsfeed has been jam-packed with Brexit stories since England & Wales voted to quit the European Union (for the record, Scotland and Northern Ireland voted overwhelmingly to remain—and this will have additional effects on the state of the UK).  On the morning of the result, I gave a CLE lecture that was co-opted quite a bit by the news.  Personally, I was stunned, and my befuddlement was heightened by the many voters who offered that “I just voted Leave to shake things up… I didn’t think we’d actually do it!”

(Aside:  this is what happens when dubious soundbytes—and flat-out falsehoods—appeal to an angry and frustrated electorate.  Take heed, America… November is coming.  Additional aside: don’t be too hasty to conclude that Brexit will actually come to pass.  That is a good thing.  If it does, Scoxit is next.)

Lest we Yanks think the result creates problems only on the other side of the Atlantic… think again.  Within hours of the vote, the Pound plummeted to a three-decade low (the Euro fell also, but not precipitously), and that makes American goods and services more expensive abroad.  Logically, the US manufacturing sector will take a hit as commerce slumps with the world’s largest trading bloc.  True, it makes travel across the Atlantic highly attractive, but it stymies our already tepid economic recovery.

What of litigation, though?  How will the Brexit affect service of process in the United Kingdom?  Or on the continent, for that matter?  How will it affect the compulsion of evidence in foreign jurisdictions?

Short answer:  it won’t, except perhaps to make agent services in Europe and the UK less costly to American litigants.

The long answer really isn’t long, except to say that service of process and evidence compulsion are very country-specific issues, and those issues have little or nothing to do with the European Union.  As to procedural issues in American lawsuits, Brexit will have negligible effect.

 

(Image by Rlevente, via Wikimedia Commons.)