Service of Foreign Proceedings on Russian Parties: Rules to be Clarified by the Supreme Commercial Court

Later this year the Presidium of Russia’s Supreme Commercial Court will decide whether service by means other than those under the Hague Convention constitutes proper notice sufficient for enforcement of the resulting judgment of a foreign court.

The decision will have significant repercussions for international litigations involving respondents based in Russia, since to date in many instances foreign courts have permitted service by alternative means. The reason according to them is that service through official channels may take significant time.

The case deals with the enforcement of a 2010 default judgment rendered by the High Court of England and Wales against a Russian company. The High Court had permitted service by alternative means and the claim pack was served on the Russian respondent by post.

Proper Service of Foreign Proceedings

The question before the SCC is whether an “effective” service (service in fact) is sufficient given the declaration made by the Russian Federation under the Hague Convention. The Russian Federation declared that service on Russian parties must only be effected by means expressly provided in the Hague Convention (through responsible state authorities) and alternative service is not allowed.

Surprisingly, the first court to address what constitutes proper service on a Russian respondent was the High Court in England. In BNP Paribas S.A. v. OJSC Russian Machines & ors [2011] EWHC 308 (Comm) Blair J held that while Russian law did not permit service by alternative means, it did not make it illegal. This was sufficient for the judge to permit service by alternative means (post and courier) on a Russian defendant.

This finding seems to be at odds with the opinion expressed by the three-judge panel of the Supreme Commercial Court. For them the declaration made by the Russian Federation meant that service by alternative means is “improper” and “impermissible”.  Since the declaration was attached to an international treaty (the Hague Convention) it overrode any contrary provisions of Russian law.

More than that, the mandatory effect of the declaration was such, the panel said, that it could not have been waived by the respondent. The lower courts found that the respondent assumed the risk of being served by alternative means by agreeing to English law and an English forum.  The panel held these circumstances were clearly irrelevant.

The judges also stressed that the respondent chose not to participate in the proceedings and this was they suggested because it considered the service deficient.

Improper Service and Enforcement

The real question for the panel appears to have been whether the judgment should be enforced despite deficient service. On this issue, the panel refrained from expressing any opinion.

The Supreme Commercial Court will have to decide whether any substantive prejudice needs to be caused to the respondent in order for the recognition and enforcement to be refused on improper service grounds. If this approach is adopted the court will need to consider whether the respondent was prejudiced in this case given that it is undisputed that it received all the documents (which were likely translated to Russian).

Proper service appears to be one of the trickiest questions when it comes to enforcement of foreign judgments in Russia. Earlier this year the Federal Commercial Court for the Moscow Circuit overruled a lower court’s decision enforcing a Californian default judgment against a Russian party. It ruled that an affidavit sworn at the US embassy was insufficient to evidence proper service (case no. А40-99083/12-50-1011).

The full text of the Ruling of the three-judge panel of the Supreme Commercial Court dated 24 April 2013 is available here (in Russian).