Case of the Day: Scheck v. Republic of Argentina

The case of the day is Scheck v. Republic of Argentina (S.D.N.Y. 2011). Scheck had a German judgment against Argentina arising out of Argentina’ default on its German bonds. Scheck sought recognition and enforcement of the judgment in New York. (Why was the case in federal court? Although actions to enforce foreign judgments arise under state not federal law, under 28 U.S.C. § 1330, the district courts have original jurisdiction of “any nonjury civil action against a foreign state … as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity …”) The issue before the court was service of process.

Under the terms of the German bond issue, Argentina had appointed an authorized agent for service of process in Germany for suits brought in Germany. Argentina had also issued US bonds, and in that issue, it had appointed a different agent for service of process in the US for suits on the US bonds. Scheck sought to serve process on the Vice President of the Banco de la Nación Argentina in New York, the designated US agents on the US bonds. Argentina objected, rightly, to this attempt at service. Under § 1330, Scheck was required to effect service as under the FSIA, and since the agent had no authority to accept service in a German bond case, the service was improper under § 1608(a)(1).

Scheck then sought to serve Argentina via the Argentine Central Authroity under the Hague Service Convention. Six months after transmitting the required papers to the Central Authority, the Argentine consul general in Los Angeles told Scheck’s agents that “there were problems.” Still three months later, Scheck had not received a certificate of service from the Central Authority.

Under Article 15(2) of the Convention:

Each Contracting State shall be free to declare that the judge, notwithstanding the provisions of the first paragraph of this Article, may give judgment even if no certificate of service or delivery has been received, if all the following conditions are fulfilled –

a)  the document was transmitted by one of the methods provided for in this Convention,
b)  a period of time of not less than six months, considered adequate by the judge in the particular case, has elapsed since the date of the transmission of the document,
c)  no certificate of any kind has been received, even though every reasonable effort has been made to obtain it through the competent authorities of the State addressed.

The United States has made such a declaration.

The court held that in light of Article 15 and the failure of the Argentine Central Authority to return a certificate of service or delivery, it could proceed whether or not the Central Authority had actually effected service. There were no due process concerns, since Argentina obviously had actual notice of the proceedings.

Argentina asserted that the request for service abroad form was invalid because Scheck had selected two methods of service rather than one, but the judge found this objection “frivolous” on the grounds that the Central Authority could have used either of the methods of service. Argentina also objected to the use of a stamped signature rather than an original signature, but the court rejected this argument on the grounds that “the Convention states that a stamp would be proper.” This is curious, as I don’t see any reference to a stamp in the Convention, but surely a stamped signature should be acceptable. In any event, if the Argentine Central Authority wanted to assert that the request did not comply with the Convention it was required to “promptly” inform the applicant, which didn’t happen here.

Argentina could have avoided this result if it had been willing to do what China did in the Luo case, namely, send back a certificate stating that its Central Authority refused to execute the request for service under Article 13 on the grounds that service would “infringe its sovereignty or security.” But even if Argentina had done so, Scheck would still have been entitled to attempt to make service by mail to the Ministry of Foreign Affairs or else through the diplomatic channel, as the FSIA authorizes.

4 responses to “Case of the Day: Scheck v. Republic of Argentina”

  1. […] of foreign defamation judgments; the post on the Australian decision in the Altain Khuder case, the case of the German investors in Argentine bonds seeking recognition and enforcement of their judgments against Argentina in the […]

  2. […] motion to vacate another award on procedural grounds and confirming the award; and Scheck v. Republic of Argentina, rejecting Argentina’s defense of insufficient service of process in an action for […]

  3. […] on September 16, 2011 in FSIA, Recognition and EnforcementIn the case of the day from June 6, 2011, Scheck v. Republic of Argentina, the district court rejected a challenge by Argentina to service of process in an action to enforce […]

  4. […] such a declaration. So under Article 15(2), the US court is free to enter a default judgment. As in Scheck v. Republic of Argentina, another sovereign debt case, the foreign central authority probably would have been better off […]

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