On April 2, 2020, in a unanimous decision, the California Supreme Court in Rockefeller Technology Investments (Asia) VII v. Changzhou Sinotype Technology, Co., Ltd. clarified that waivers of Hague Convention service requirements are enforceable with parties located in China.
In 2018, we wrote about a California Court of Appeal’s ruling that voided a $414 million arbitration judgment entered against Changzhou Sinotype on the grounds of improper service under the Hague Convention—despite the parties’ agreement to waive Hague Convention service requirements and US personal jurisdiction defenses. The California Supreme Court’s decision reversed the Court of Appeal’s ruling.
In its opinion, the California Supreme Court held that the Hague Convention applies only when the law of the forum state requires formal service of process to be sent abroad. Because the parties’ agreement constituted a waiver of formal service under California law in favor of an alternative form of notification as agreed upon in their contract, the formal service requirements of the Hague Convention do not apply.
Rockefeller Technology (an American investment partnership) and Changzhou Sinotype (a Chinese company) entered into a contract in 2008 in which Sinotype agreed to submit “to the jurisdiction of the Federal and State Courts in California” and to “the Judicial Arbitration & Mediation Service [JAMS] in Los Angeles for exclusive and final resolution” of all disputes with Rockefeller Technology. Both parties agreed to be served with process by three specific methods—Federal Express, fax, and email. These three service methods are not expressly authorized by the Hague Convention, which also prohibits serving parties in China without going through the Chinese Central Authority.
After a dispute arose, Rockefeller Technology submitted its claims against Sinotype to binding arbitration at JAMS. JAMS and Rockefeller Technology both sent arbitration notices and documents directly to Sinotype pursuant to the parties’ 2008 contract—via Federal Express and email. Sinotype did not appear and did not participate in the arbitration proceedings. After hearing and briefing, the arbitrator entered a $414 million award against Changzhou Sinotype.
California Trial Court Confirms Judgment
In 2014, Rockefeller Technology filed an action in Los Angeles Superior Court to confirm its arbitration award. Rockefeller served Sinotype with court notices and pleadings in the manner agreed upon by the parties in their contract (via Federal Express and email). Sinotype again failed to appear. In October 2014, the Los Angeles Superior Court entered judgment confirming Rockefeller Technology’s award. Rockefeller served the judgment on Sinotype by the same agreed-upon methods.
In January 2016, after Rockefeller Technology attempted to execute the judgment against some of Sinotype’s assets in the United States, Sinotype filed a motion to set aside the judgment on the basis of improper service. Sinotype argued that the parties’ 2008 agreement violated the Hague Convention. The trial court rejected Sinotype’s arguments, finding that Rockefeller Technology and Sinotype agreed to waive the Hague Convention requirements and to serve and accept process by Federal Express, fax, and email. The trial court also found that Sinotype had actual notice of more than seven years of arbitration and state court proceedings but decided not to appear until judgment enforcement began.
California Appellate Court Reverses Confirmation
On appeal, the California Court of Appeal reversed the trial court’s ruling on the basis that because Sinotype was not served with process in accordance with Hague Convention requirements, California courts did not have personal jurisdiction over Sinotype. The appellate court concluded that any attempt at waiver of service is invalid as contrary to the Hague Convention and contrary to China’s own laws, which require service of process to go through its Central Authority, despite the parties’ agreement allowing service of process via other means.
California Supreme Court Reverses the Appellate Court
On April 2, 2020, the California Supreme Court issued an opinion reversing the appellate court. In reversing, the California Supreme Court clarified that dispute resolution clauses that waive the Hague Convention’s formal service of process requirements are enforceable—even with parties located in China and even if China objects to service of process via other means.
The California Supreme Court held that the parties’ agreement constituted a waiver of formal service of process under California law. The parties agreed to waive formal service of process in favor of informal notification through Federal Express or similar courier. Therefore, the Hague Convention did not apply.
The California Supreme Court held that when parties agree to California arbitration, they also submit to the personal jurisdiction of California courts to enforce the agreement and any judgment under California law. Rockefeller and Sinotype did precisely that in their contract. The California Supreme Court found that provisions in the contract “leave little doubt that the parties intended to supplant any statutory service procedures with their own agreement for notification via Federal Express.” The parties’ agreement, the Court held, is authorized under California’s Code of Civil Procedure Section 1290.4(a), which allows “parties to an arbitration agreement to waive otherwise applicable statutory requirements for service of summons in connection with a petition to confirm an arbitration award and agree instead to an alternative form of notification.”
The California Supreme Court also cited policy considerations that support its decision, including the promotion of “California’s long-established and well-established policy favoring arbitration as a speedy and inexpensive means of settling disputes.” Citing the California Arbitration Act, the California Supreme Court explained that the purpose of the act was to “promote contractual arbitration . . . as a more expeditious and less expensive means of resolving disputes than by litigation in court” (emphasis in original). Requiring formal service processes abroad, “where sophisticated business entities have agreed to arbitration and a specific method of notification and document delivery[,] would undermine the benefits arbitration provides” and would be “contrary to [California] Legislature’s attempts to position California as a center for international commercial arbitration.”
The California Supreme Court’s decision reinforces that dispute resolution clauses involving waivers of Hague Convention service requirements are enforceable in California. Prior to the California Supreme Court’s ruling, there was uncertainty regarding the validity of notice to Chinese parties in disputes where Hague requirements were waived, so parties had to comply with Hague requirements even despite agreed-to waivers. The California Supreme Court’s decision also highlights the importance of drafting clear arbitration and waiver of service clauses in international agreements.