Accounting for Law

Hague Service Convention aims to simplify rules, but regime isn't perfect

By Ruzbeh Hosseini

The Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Service Convention) is a multilateral treaty that standardizes and attempts to simplify the rules for services of process of court documents between member states.

Currently, there are 68 contracting states, of which Canada is one. Other member states include the United States of America, Mexico, most countries of Western and Eastern Europe, Russia, China, India, South Korea and Japan. Pursuant to the Hague Service Convention, each signatory is required to designate a central authority that accepts, and in many cases is solely responsible for, effecting service of process within the member state (Articles 2-5, Hague Service Convention).

Where the recipient state does not object, Article 10 of the Hague Service Convention allows a party “to send judicial documents” to the recipient parties via mail. However, the use of the word “send” rather than “serve” or “service” makes it unclear whether service can be properly effected in the recipient state through the use of this method. Moreover, many signatories to the Hague Service Convention, such as Germany, Russia and China, have objected to Article 10.

When the central authority of a member state receives a request for service, it is required to arrange for service in the manner permitted by the receiving state (Article 5, Hague Service Convention). In many countries, service is typically accomplished through a local court. Once service is effected, the central authority is required to confirm service by issuing a certificate of service to the party who made the request (Article 6, Hague Service Convention).

Under the Hague Service Convention, service is not effected unless a certificate is issued by the central authority. To determine whether the Hague Service Convention has been ratified and whether a state has objected to Article 10, one ought to refer to the most recent Hague Service Convention status report.

The rules related to the Hague Service Convention are codified in Rule 17 of Ontario’s Rules of Civil Procedure (Rules of Civil Procedure, RRO 1990, Reg 194 [Rule or Rules]). Rule 17.05 prescribes the rules for service of an originating process or other documents in foreign jurisdictions. Where a document is required to be served within a state that is a signatory of the Hague Service Convention, the rules require that service be effected through the central authority of the contracting state or in a manner that is permitted by Article 10 of the Hague Service Convention (Rule 17.05(3)).

While the Hague Service Convention was meant to simplify and expedite service of process of judicial documents, the regime is not perfect. Those who have experience with service by this method will likely agree that service through a central authority can take upwards of six months or longer. Furthermore, more serious issues can arise where a central authority refuses or simply fails to serve a document, as it is required to do.

An extreme example of the issues that can occur with service under the Hague Service Convention is exemplified in Khan Resources Inc. et al. v. Atomredmetzoloto JSC et al. (2012 ONSC 1522 [Khan]). In Khan, the moving parties entered into a joint venture with two Russian state companies for the development of a uranium mine in Mongolia. The moving parties commenced an action against the Russian companies in Ontario after a breakdown of that joint venture relationship. As Russia is a signatory to the Hague Service Convention, the moving parties requested that the Russian central authority serve the statement of claim upon the two Russian Defendants in Russia.

Notwithstanding the moving parties’ full compliance with the Hague Service Convention, the Russian central authority exercised its right under Article 13 of the Hague Service Convention to refuse service on national security grounds. Article 13 of the Hague Service Convention allows a state to refuse to comply with a request for service on the ground that “it claims exclusive jurisdiction over the subject-matter of the action or that its internal law would not permit the action upon which the application is based” (ibid at para 2).

Faced with the Russian central authority’s refusal to serve the statement of claim, the plaintiffs brought a motion in Canada seeking an order for substituted service and validation of service, instead of challenging the Russian central authority’s refusal to serve the statement of claim in the Russian court system, which would have been costly and inconvenient.

The issue before the court was whether a plaintiff can resort to domestic law, specifically Rule 16 of the Rules of Civil Procedure, to substitute, dispense with or validate service of an originating process where a contracting state’s central authority refuses to facilitate service under Article 13 of the Hague Service Convention (ibid at para 4).

Justice Brian O’Marra of the Superior Court held, and the Ontario Court of Appeal recently agreed (2013 ONCA 189 (C.A.)), that the Hague Service Convention applied and that Rule 17.05(3) had to be interpreted in a way that upheld Canada’s international obligations.

His Honour held that when the Hague Service Convention applies, a contracting state must comply with its provisions and that the contracting states are not free to apply their domestic laws to circumvent the provisions of the Hague Service Convention. Accordingly, the Hague Service Convention prescribes that domestic law with respect to service of court documents is ousted and the receiving state determines the regime for service (Khan at paras 40-43).

In making this determination, the court focused on the words of Rule 17.05(3), which states that the only methods of service available when service is to be effected in a contracting state is pursuant to the Hague Service Convention. The court held that the “exclusive character” of the Hague Service Convention precludes an order being made pursuant to Rule 16.

The Khan case contradicts and appears to overrule an earlier case of a Master of the Superior Court that ruled that reliance upon Rule 16 may be had where a party has exhausted all reasonable means to serve a party, but was unsuccessful (Zhang v. Jiang [2006] 82 OR (3d) 306 (S.C.J.)). This leaves a potential void with respect to remedies that are available where a party makes all attempts to serve a foreign defendant through the Hague Service Convention, but is unsuccessful.

Article 15 of the Hague Service Convention allows a judge of a contracting state to grant judgment where no certificate of service has been received, if all of the following conditions are fulfilled:

    1. the document was transmitted by one of the methods provided for in this Convention,

    2. a period of time of not less than six months, considered adequate by the judge in the particular case, has elapsed since the date of the transmission of the document, and

    3. no certificate of any kind has been received, even though every reasonable effort has been made to obtain it through the competent authorities of the State addressed (Hague Service Convention, Article 15, Book of Authorities).

While there are no reported decisions in Ontario that consider Article 15 of the Hague Service Convention, the U.S. courts have had an opportunity to deal with the matter. In In re South African Apartheid Litigation (643 F.Supp.2d 423 (S.D.N.Y.), Book of Authorities [South African]), a German corporate Defendant brought a motion to dismiss the claims against it based on, among other things, the submission that service upon it was not effective pursuant to the Hague Service Convention.

The plaintiff moved for an order for alternate service under Rule 4(f)(3) of the United States Federal Rules of Civil Procedure, which provides for the methods of service in foreign jurisdictions “by other means not prohibited by international agreement….”

In South African, the plaintiffs commenced an action against Rheinmetall, a German company, on Nov. 11, 2002. On March 20, 2003, the statement of claim was transmitted to the German central authority for service on Rheinmetall (ibid at p.427), which is the only means of service as Germany has objected to Article 10 of the Hague Service Contention (ibid at p.432).

Rheinmetall challenged the propriety of service through the Hague Service Convention process before the German courts. The issue before the German courts remained unresolved notwithstanding six years of litigation (ibid at p.427-28). As a result of the German court process, no certificate of service was ever delivered to the plaintiff by the German central authority (ibid at p.437).

On the motion, the plaintiffs sought an order for substituted service on the lawyer for Rheinmettall, which was granted by the U.S. Court notwithstanding that service through the German central authority was the only method of service due to Germany’s objection to Article 10 of the Hague Service Convention (ibid at p.437-38).  In doing so, the court held that Article 15 of the Hague Service Convention allows a court to claim jurisdiction over a foreign defendant when a plaintiff has not received a certificate of service and the factors in Article 15 have been met.

In S & S Machinery Corp. v. Wuhan Heavy Duty Machine Tool Group Co., Ltd. (2012 WL 958528 (E.D.N.Y.)), the plaintiff brought an action against Wuhan Heavy Duty Machine Tool Group Co., Ltd. (“Wuhan”), a Chinese company, alleging breach of an agency agreement. It brought a motion for default judgment against Wuhan after it successfully obtained an order noting Wuhan in default.

The facts in this case are as follows: the plaintiff served Wuhan pursuant to the Hague Service Convention. There was an issue with service of Wuhan and the Plaintiff never received a certificate of service. While it was unclear whether the Ministry of Justice of China complied with its obligations under the Hague Convention in its service of Wuhan, it was clear that Wuhan did receive notice of the Statement of Claim as it had submitted various letters to the Court in respect of the action. Accordingly and due to the fact that there were existing orders validating service pursuant to Article 15 and noting Wuhan in default for failure to deliver a statement of defence, the plaintiff was granted judgment against Wuhan.

In Scheck v. Republic of Argentina (2011 WL 2118795 (S.D.N.Y.) [Scheck]), the plaintiffs brought an action seeking to enforce judgments that they obtained in Germany. The plaintiffs initially filed a motion for summary judgment in September 2010, but the court held the motion in abeyance pending completion of service of process pursuant to the Hague Service Convention (ibid at p.1).

The plaintiffs complied with the requirements of the Hague Service Convention, but did not receive a certificate of service (ibid at p.1). Notwithstanding that they did not have a certificate of service, the court held that it was entitled to assert jurisdiction over the defendant because the plaintiffs had satisfied the requirements of Article 15 (ibid at pp.3-4). The court held that service was proper and ordered that the defendant had a further 60 days to “answer, move to dismiss, or otherwise respond to the complaint and motion for summary judgment” (ibid at p.4).

In each of the above cases, the U.S. Court interpreted Article 15 of the Hague Service Convention as providing a basis for the court to obtain jurisdiction over a foreign defendant where service via the Hague Service Convention could not be effected due to the fact that a certificate of service was not obtained. In each of these cases, the basis for claiming jurisdiction over the foreign defendant was expressly based on Article 15 of the Hague Convention.

In South African, the court made an order for substituted service. In Wuhan, the court validated service and subsequently made an order for judgment.  In Scheck, the court validated service, but denied judgment until the defendant was provided with an opportunity to make an appearance.

As stated in Khan, once it is determined that the Hague Service Convention applies with respect to service upon a foreign party, Rule 17.05 applies to the exclusion of Rule 16. Subrule 17.05(3)(a) of the Rules of Civil Procedure provides that an originating process served outside Ontario “…shall be served…through the central authority in the contracting state….”

However, Rule 17.05 does not leave a plaintiff without recourse in the event that issues arise. Subrule 17.05(4)(c) provides that “[s]ervice may be proved…in accordance with the [Hague Service Convention], if service is made in a contracting state.” This likely leaves room for a party in Ontario to rely upon Article 15 of the Hague Service Convention to prove (or validate) service where necessary.

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