United States: EPC Contractors Procuring From Foreign Companies Need To Reconsider Their Contracts

A recent California case may force engineering, procurement and construction companies doing business with foreign suppliers to reconsider—and maybe rewrite—their contracts. In Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd., the California Court of Appeal held that parties may not contract around the formal service requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents, commonly referred to as the Hague Service Convention. The decision could have profound implications for international business.

When a U.S. EPC company procures materials, parts, and equipment from foreign companies, it typically requires the foreign company to resolve its dispute in U.S. courts or in some arbitral forum in the U.S. The Rockefeller decision arguably makes it impossible to require foreign companies from some of the largest economies, including China, Japan, Germany, U.K., India, Korea, Russia and Mexico, to show up in a California court based on notice provided by mail, courier (FedEx), or email, even if the parties agreed to such forms of notice in their contract. This will have profound consequences for companies with global supply chains.

Construction litigators beware!

The court in Rockefeller held that parties cannot enter into a private agreement to circumvent the official service requirements set forth in the Hague Service Convention. The Convention was created to allow and regulate service of process in a foreign country. Service under the Convention requires transmission of court documents through the "Central Authority" of the requesting and receiving countries, with the latter to arrange actual service on the foreign party. Not surprisingly, Hague service is expensive and cumbersome; it often takes many months to complete.

Article 10 of the Convention allows contracting states to permit service by mail; and it allows them to object to service by mail. Many commercially important countries, including the eight big economies listed above, submitted objections to Article 10 when they joined the Convention, meaning service in those countries generally cannot be accomplished by mail. In the U.S., however, the parties often agree to allow notification in accordance with contractual notice provisions including mail. After Rockefeller, such contract language is no longer enforceable, at least in California.

In Rockefeller, Rockefeller Investments (Asia) VII (a U.S. company) wanted to enforce its $414M arbitration award in California state court. SinoType (a Chinese company), although aware of the proceedings, did not participate in the arbitration or the court case, and the California trial court issued judgment confirming the award. Fifteen months later, SinoType moved to set aside the judgment on the basis of improper service. The trial court denied the motion, acknowledging that service had not complied with the Convention, but concluding that the parties had privately agreed to accept service by mail. The Court of Appeal reversed, explaining that the Hague Service Convention does not permit service by mail in countries that have objected to Article 10, and China, where SinoType was served, has filed an Article 10 objection. The court rejected Rockefeller's argument that private parties may establish terms of service by contract, finding that the language of the Convention refers explicitly to the rights of each State, not its citizens, and as such, private parties cannot contract around the treaty.

The Court also rejected Rockefeller's argument that the judgment remained valid due to SinoType's actual notice of the proceedings and failure to timely move to set aside the judgment. The court held that personal jurisdiction requires valid service of process, and any judgment rendered without proper service is "void as violating fundamental due process," and void judgments can be challenged at any time. (The Court did not address the validity of service for the underlying arbitration or potential defenses to enforcement of the award.)

For existing contracts with foreign companies, the Rockefeller decision means parties should review them carefully to identify and evaluate provisions that purport to bypass Hague service requirements, including assessment of whether the foreign contracting party might have to be served in a country that objected to Article 10 of the Convention.

For future contracts, the decision puts companies doing business with foreign parties on notice that attempts to contract around Hague Service Convention are likely to be ineffective. At the least, U.S. parties should provide in their contracts that the foreign party will pay for the costs of service if the foreign party does not appear voluntarily. (The Convention does not prohibit a foreign party from appearing in litigation voluntarily.)

Finally, the full import of the Rockefeller decision remains to be seen. Although purporting to interpret an international treaty as a matter of federal law (under the Supremacy Clause), a decision of the California Court of Appeal does not bind federal courts or courts in other states—and it may be subject to review by the Supreme Court of California. But for now, the Rockefeller decision makes it harder to get foreign parties into a court in the U.S. by serving notice via mail, courier or email.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
14 Aug 2018, Seminar, Los Angeles, United States

August 14, 2018 - Orange County
Embassy Suites Anaheim Hotel - Garden Grove

August 21, 2018 - Pasadena Area
DoubleTree by Hilton Hotel - Monrovia

September 20, 2018 - Los Angeles
Sheraton Gateway Hotel - LAX

15 Aug 2018, Seminar, Los Angeles, United States

August 15, 2018 - Orange County Embassy Suites Anaheim Hotel - Garden Grove

August 22, 2018 - Pasadena Area DoubleTree by Hilton Hotel – Monrovia

16 Aug 2018, Webinar, Los Angeles, United States

Please join Sheppard Mullin for this month's Third Thursday Emerging Company Webinar educating entrepreneurs and emerging companies on the key legal issues they face during the growth of their companies.

 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions