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April 28, 2020

Supreme Court of California Holds that the Hague Service Convention does not Preempt Service of Process Waivers

On April 2, 2020, the Supreme Court of California issued a much-awaited decision on whether Parties to international arbitration seated in California are allowed to waive the requirements of service of process contained in the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, November 15, 1965, 20 U.S.T. 361, T.I.A.S. No. 6638 (the “Hague Service Convention” or the “Convention”). In Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd. (Cal., Apr. 2, 2020, No. S249923) (“Rockefeller”), the Supreme Court of California held that: (1) the Convention applies only when the law of the forum state requires formal service of process to be sent abroad, and (2) Parties are allowed to waive formal service of process under California law in favor of an alternative form of notification.

Rockefeller involved a memorandum of understanding (“MOU”) between a company based in the People’s Republic of China (SinoType) and a California company (Rockefeller). The MOU selected Los Angeles as the seat of arbitration, provided for service of process via “Federal Express or similar courier,” and contained a consent to the jurisdiction of California courts. Following an arbitration in which SinoType did not participate, the arbitrator ruled in Rockefeller’s favor for damages in excess of $414 million. Rockefeller sought to have the award confirmed. SinoType appeared and moved to set aside the default judgment for insufficient service of process, arguing that Rockefeller failed to comply with the Hague Service Convention. SinoType’s motion was denied, the Court of Appeal reversed, and the Supreme Court of California reversed the Court of Appeal.

The Supreme Court of California initially noted that although a signatory country may object to its citizens and entities’ ability to send judicial documents by postal channels under article 10 of the Convention, that objection does not estop those citizens and entities from waiving the application of the Convention altogether. The Court reasoned that the Convention applies only to “service of process in the technical sense” and to the “formal delivery of documents,” but not to whether “a document needs to be served and which document needs to be served,” an issue to be determined in accordance with the lex fori — in this case, California. Thus, where parties agreed to waive service of process in accordance with California law the Convention would not apply, and a country’s objection to article 10 would not prevent service via Federal Express.

The crux of the case was the Parties’ arrangement in the MOU to waive formal service of process. The Court found that: “[t]he MOU’s language confirms the Parties’ intent to replace ‘service of process’ with the alternate notification method specified in the agreement.” Id. at 20. The Court reasoned that: “[w]hen parties agree to California arbitration, they consent to submit to the personal jurisdiction of California courts to enforce the agreement and any judgment under section 1293 [and] [w]hen the agreement also specifies the manner in which the Parties ‘shall be served,’ consistent with section 1290.4, subdivision (a), that agreement supplants statutory service requirements and constitutes a waiver of formal service in favor of the agreed-upon method of notification.” Id. at 22.

The Court’s decision in Rockefeller is a much-welcomed development in clarifying that when parties to international arbitral proceedings seated in California waive formal service of process in favor of informal notice, the Hague Service Convention will not prevent enforcement of the agreed-upon method of service of process. In preventing parties from negating a clear an unambiguous written waiver of service of process, the Supreme Court of California has reinforced the view that the purpose of the California Arbitration Act is to promote contractual arbitration and the autonomy of disputing parties to craft their desired procedures. Therefore, consistent with Rockefeller, parties involved with international arbitration in California would do well to create clear and unambiguous service of process provisions as a part of their dispute resolution clauses.

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