Overview
First Tuesday Update is our monthly take on current issues in judgment enforcement. This month, the DC Circuit reversed and remanded a lower court decision to enforce a $42 million International Centre for Settlement of Investment Disputes (ICSID) arbitral award against Venezuela because service of process under the Hague Convention and the Foreign Sovereign Immunities Act (FSIA) was not completed. Saint-Gobain Performance Plastics Europe v. Bolivarian Republic of Venezuela, No. 21-7019 (D.C. Cir. Jan. 25, 2022). We have written before about service on foreign sovereigns and the Hague Convention, see Should The Postman Ringeth? Service of Process Abroad by Mail Under the Hague Service Convention. The DC Circuit’s decision continues the judicial pattern of strict construction of the FSIA.
Saint-Gobain involves a dispute between Saint-Gobain Performance Plastics Europe (Saint-Gobain), a French corporation that held majority interest in a Venezuelan company that produced parts for hydraulic fracturing, and the government of Venezuela. In March 2011, the Venezuelan government ordered the expropriation of Saint-Gobain’s interest in the Venezuelan company. Relying on a bilateral treaty against expropriation, Saint-Gobain initiated arbitration proceedings pursuant to the ICSID Convention to receive compensation from Venezuela.
In 2017, the arbitral panel concluded Venezuela breached the bilateral treaty and awarded Saint-Gobain $42 million. In 2018, Saint-Gobain sued Venezuela in the United States District Court for the District of Delaware to enforce the award. (The case was later transferred to the DC District Court.) Saint-Gobain served process via the Hague Convention and the proper papers were received by Venezuela’s Central Authority but by all accounts the papers went no further. Under Venezuelan law, the Central Authority was tasked with serving the papers on the attorney general and completing a certification that it had done so. The attorney general, however, was never served.
In 2019, after receiving no response from Venezuela, Saint-Gobain sought a default judgment. Venezuela filed a motion to dismiss the complaint alleging lack of personal jurisdiction due to improper service and improper venue. The Delaware court disagreed regarding service, but agreed the venue was improper and transferred the case to the United States District Court for the District of Columbia. Once transferred to DC, Venezuela moved to dismiss for lack of personal jurisdiction and Saint-Gobain filed a motion for summary judgment. The DC court denied Venezuela’s motion and granted Saint-Gobain’s motion for summary judgment, finding that Saint-Gobain properly served Venezuela under Article 15 of the Hague Convention (described in greater detail below). Venezuela appealed the district court’s ruling. On appeal, the question was whether Saint-Gobain followed the service requirements as required under FSIA.
The FSIA, 28 U.S.C. § 1608, identifies four ways to serve a foreign state. These four options, which are listed in descending order of preference, include: (1) agreement between the plaintiff and the foreign state regarding method of service; (2) if no agreement between the plaintiff and foreign state exists, delivery of a copy of the summons and the complaint pursuant to “an applicable international convention on service of judicial documents”; (3) by sending a copy of the relevant documents “to be addressed and dispatched by the clerk of the court to the head of the ministry of foreign affairs of the foreign state concerned”; or (4) sending the relevant documents to be “dispatched by the clerk of the court to the Secretary of State …[who] shall transmit one copy of the papers through diplomatic channels to the foreign state.” In Saint-Gobain, the parties did not agree to service protocols, and therefore, the court identified option 2 as being at issue.
In addition to FSIA, the Hague Convention contains guidelines regarding service of judicial documents among the signatory sovereign states. Article 5 of the Hague Convention requires that once the Central Authority of a signatory state receives a request for service, the Central Authority must serve the documents pursuant to the method identified by the receiving country’s local law or by the method requested by the applicant. Article 15 indicates that a court may not enter a default judgment based on a determination that the foreign entity “has not appeared” until the document is served according Article 5 or another valid method of service under the Hague Convention. It is worth noting that there are exceptions where entry of default can be entered, but none of those exceptions applied in Saint-Gobain.
The United States filed an amicus brief in this case and took a position of strict textual construction of the Hague Convention and FSIA, which has been its consistent position in these cases. Moreover, the US “has long taken the view that delivering a request for service on the United States to its Central Authority is not service on the United States under the Convention.” Brief for the US as Amicus Curiae p. 20, Saint-Gobain Performance Plastics Europe v. Bolivarian Republic of Venezuela, No. 21-7109 (D.C. Cir. Jan. 25, 2022). The main policy concern of the US seems to be reciprocity and fear that the US would be similarly treated by a foreign court system. Of course, the US would not resist service and would abide by its treaty obligations once the Central Authority received documents. This policy position gives the benefit of the doubt to recalcitrant sovereigns rather than protecting the interests of private investors who have sought a remedy for expropriation.
The DC Circuit applied a textual analysis in considering the relevant provisions of the Hague Convention and FSIA. The DC Circuit explained that Article 5 of the Hague Convention is clear that the Central Authority of a signatory foreign state must serve the defendant according to the requirements of the foreign state’s internal laws or by a method agreed upon by the parties. Since Saint-Gobain and Venezuela had not agreed to a method of service, the method of service required under Venezuelan law applies. Under Venezuelan law, lawsuits against Venezuela must be served on the attorney general of Venezuela. Since Saint-Gobain did not serve the attorney general (and similarly did not receive a Certificate of Service from the Central Authority), service was improper under Article 5 of the Hague Convention. The DC Circuit rejected Saint-Gobain’s argument that requesting service from the Central Authority should constitute proper service because the Central Authority is the foreign state. The court viewed this argument as both contrary to the plain text of the Hague Convention and improperly equating the Central Authority to a sovereign defendant.
The court noted that “[e]ven when ‘the equities of a particular case may seem to point in the opposite direction,’ the Supreme Court has required courts to adhere to the plain text of the FSIA and the Hague Convention in view of the ‘sensitive diplomatic implications.’” The DC Circuit distinguished Saint-Gobain from Water Splash v. Menon where “the FSIA and the Hague Convention Article 10(a) were silent on use of mail ‘for the purpose of service,’ the Convention is not silent on the elements of service at issue.” 137 S. Ct. 1504, 1508 (2017).
The DC Circuit court reversed and remanded the lower court’s opinion and directed Saint-Gobain to serve Venezuela pursuant either to the Hague Convention or the other options available in the FSIA, including diplomatic channels.
