The highest court in the land’s recent ruling has opened American-based international organizations to lawsuits, according to an Insurance Journal article. The Supreme Court of the United States has held that a World Bank affiliate must defend allegations against it claiming it is legally responsible for environmental damage caused by an India power plant.
The lawsuit, Jam v. International Finance Corp., alleges inadequate supervision of the India-based power plant’s construction after the defendant International Finance Corp. (IFC) provided a $450 million loan for its construction. IFC is the World Bank’s private sector lending arm. The plaintiffs suing the IFC include local Indian fishermen and farmers.
A federal law from 1945 states international organizations are granted the same immunity as foreign countries. A 1976 law, however, states that foreign governments do not receive the benefit of immunity when they are involved in commercial dealings. The latter law makes no mention of international organizations. The central issue before the SCOTUS was how the 1976 provision affected, if at all, the 1945 law.
The SCOTUS’s Decision
In a 7-1 decision, the court ruled that sovereign immunity does not protect United States-based international organizations when the company is involved in commercial activities. The effect of the decision is that new legal liability could fall on the IFC and other multilateral development banks. The SCOTUS ruling does not affect neither the International Monetary Fund (IMF) nor the European Union (EU); in fact, both entities have complete sovereign immunity from lawsuits under the terms of their charters.
Chief Justice John Roberts, writing for the majority, noted the 1976 law changed not just the immunity possessed by foreign governments involved in commercial activities, but also international organizations doing the same type of business. The Court held the 1945 law should be read to link international immunity to the law of foreign sovereign immunity allowing the two to develop in tandem and, accordingly, the 1976 law also applies to international organizations. Justice Stephen Bryer dissented and Justice Brett Kavanaugh did not participate in the case.
International lawsuits are even more complicated than domestic ones. Accordingly, international service of process requires more effort, time, and expertise than service within the United States. Attempting to perfect overseas service without specialized professional help will put your case at risk. The results can be bad: non-service, dismissal, or even impossibility of enforcement of a judgment. For these reasons, if you or someone you know wants to pursue an international lawsuit, contact the Ancillary Legal Corporation today to learn how we can help.
The highest court in the state of California is set to review whether or not a lower court’s decision to reverse a $414 million award granted in arbitration due to improper service was correct. The multi-million dollar award was given to an American partnership but later reversed when the Chinese business entity involved claimed it was not served properly.
The case is Rockefeller Technology Investments (Asia) VII v. Changzhou Sinotype Technology Co., Ltd. The companies entered into an agreement that included a clause by which parties would provide notice in English via Federal Express or some other type of mail courier service in the event of a business dispute between them.
The Hague Service Convention is a multilateral treaty adopted in 1965 by member states to the Hague Convention on Private International Law. The purpose of the Hague Service Convention was to provide international litigants with a reliable and efficient manner in which to serve documents on parties that are living, operating, or based in another country. The provisions apply to service of process in civil and commercial matters but not criminal ones.
Under the Hague Service Convention, each state must designate a central authority to accept incoming service requests. Then, a judicial officer competent to serve process in the origin country is allowed to send the request directly to the central authority of the country where service is to be made. Once received, the central authority in the receiving state arranges for service of process in the manner permitted in that country. Once service is effected, the central authority sends a certificate of service to the judicial officer who made the service request.
For those states who are not party to the Hague Service Convention, the service of legal documents occur through diplomatic channels and effected by a letter rogatory – a formal request to issue a judicial officer from a court in the state where the proceedings have started to be served by the originating court to the foreign ministry in the country of origin. This process is even longer than the one required by the Hague Service Convention typically going from the foreign ministry of the originating country to the one in the designated country, then to the local court, then an order is issued to allow service, then a certificate of service is issued. The certificate of service would pass through the same channels, but just in reverse order.
It is not uncommon in international business practices for companies to include a similar workaround in their agreements to avoid the requirements of service via the Hague Service Convention or Letters Rogatory. The purpose of this workaround is to limit the expenses associated with litigation and avoid delays typically associated with international service, which can take up to six months.
The Case at Hand
In Rockefeller Technology, the monetary award was granted after the defendant Changzhou never showed up to arbitration. A California trial court confirmed the award when the defendant once again failed to appear. When Changzhou sought to dismiss the award, the judge refused to do so because the parties had privately agreed to the service by mail. Because the Hague Service Convention does not allow individuals to be served by mail – nor does it allow them to accept these terms, the California Court of Appeals reversed the ruling noting China had filed objections to the provisions of the Hague Service Convention addressing other methods of service, which included service by mail.
The California Supreme Court’s review of the case is particularly important as it highlights the close examination over the use of the Hague Convention in countries where service via the postal service is not considered valid. Not surprisingly, based on the outcome of the California Supreme Court’s decision in the matter – and any other subsequent decisions by a higher court – American companies that have international contracts may want to reconsider how those agreements are written when it comes to addressing service of process in the event of a business dispute.
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