IJA Brigade correspondent Peter Bert returns today with a post on the procedure under which a German defendant can challenge service of process under the Hague Service Convention in the German courts after service has been made. I had asked Peter a question about this in another context, and he was good enough to expand his answer into a post, for which I’m grateful.

The German procedure is somewhat counterintuitive, and its effect on US proceedings is unclear. From Peter’s post, it seems that there are two scenarios worth noting. In the first, the central authority (typically a German court acting in an administrative rather than a judicial capacity) decides on its own not to serve documents on the grounds that the request for service does not comply with the Convention (or, I suppose, on the grounds set out in Article 13 of the Convention). This is the same way that most central authorities operate. In the second scenario, the central authority serves the papers and the defendant, post facto, asks the court to decide whether the service was proper. I don’t see that this could matter to a US court, since the purpose of the service—providing notice—has already been fulfilled. You can’t unring the bell. German courts should intervene only at the enforcement stage. Peter’s post shows that the German courts have reached this position in many key contexts but not in every case (e.g., the False Claims Act case Peter mentions), though it seems to me valid across the board.

German defendants in US litigation can ask the German courts to review a request for service of process under the Hague Service Convention originating from a US court for compliance with the Convention. There are references to this procedure in several US cases, e.g., In re South African Apartheid Litig., 643 F. Supp. 2d 423, 437 (S.D.N.Y. 2007); Bauman v. DaimlerChrysler AG, 2005 WL 3157472, at *1 (N.D. Cal. Nov. 22, 2005). This post describes the procedure and some recent cases that illustrate the approach of the German courts to US service requests.

A decision on service by the Central Authority under the Hague Service Convention constitutes a judicial administrative act (Justizverwaltungsakt). The Central Authority typically is the President of the Court of Appeals (Oberlandesgericht) in the German federal state concerned, but acting in an administrative capacity, rather than in a judicial one. Judicial administrative acts constitute a separate class of actions taken within the court system. One can, by and large, characterize these acts as everything that is not a substantive decision of a judge in a pending litigation itself, be it procedural or otherwise. Sections 23 et seq. of the Introductory Act to the Courts Constitution Act (EGGVG) govern the judicial review of such judicial administrative acts. A defendant who is served can approach the Court of Appeals—acting in its judicial, not in its administrative capacity—and seek review of a decision to order service as per the request from the US court.

For some time, German defendants tried to use this review process to prevent the service of proceedings in class actions, and, in particular, in proceedings where punitive damages could be awarded against them. The most high profile of these cases was the Bertelsmann case, where Bertelsmann was sued in the US for $17 billion in damages for its involvement with Napster. In July 2003 Bertelsmann successfully applied for a preliminary injunction from the Federal Constitutional Court (Bundesverfassungsgericht), which suspended the service of process. One of the key arguments was that $17 billion was an amount that was totally disproportionate to the alleged actions and the action was brought only to exercise undue pressure on Bertelsmann.

Ultimately, however, the attempt to prevent service failed. The preliminary injunction was not confirmed in main proceedings. Today, the courts will consider the outcome of the US proceedings only once a judgment has been entered, that is, at the enforcement stage. If punitive damages were granted that violate German public policy, then a judgment would not be declared enforceable. However, that analysis will be strictly separated from the analysis at the service stage, and service in such a matter does not per se violate public policy. Service cannot be stopped on the basis that the US matter is a class action, that it will lead pre-trial discovery or that it allows for punitive damages. A recent case discussing and dismissing all three arguments is a 2009 judgment of the Düsseldorf Court of Appeals that allowed service in a South African Apartheid litigation matter in New York.

Therefore, the more recent cases primarily deal with the question whether the foreign action falls within the scope of the Hague Service Convention.

For example, the Frankfurt Court of Appeals has held in a judgment in December 2009 that an order made by the President of the Court in his capacity as the Central Authority, which allowed service of a summons originating from the United States District Court, Eastern District of Virginia, in relation to civil penalties under the False Claims Act should not have been made. The court held that civil penalties do not fall within the definition of “civil or commercial matter” of the Hague Service Convention. This ruling of the Court of Appeals then means that from a German perspective, the service was invalid, even if compliant with the Hague Service Convention procedure.

This judgment, by the way, also illustrates that the various central authorities across the country may reach different conclusions. The President of the Munich Court of Appeals in the same matter had not allowed service on parties domiciled in Bavaria in the first place, saving the Bavarian defendants the effort of challenging the execution of the US service request.

The question what constitutes a civil or commercial matter arose in two other cases that both had anti-trust elements.

One matter in the High Court in Auckland, New Zealand, had been brought by New Zealand’s Commerce Commission. In substance, it was a competition and anti-trust matter which could have led to penalties against the German party. The Frankfurt Court of Appeals in 2010 held that not withstanding the fact that New Zealand treated the matter as commercial and the High Court entered hat it into the Commercial List, it did not qualify as a civil or commercial matter for the purposes of the Hague Service Convention. The service accordingly was held to be invalid.

It is interesting to compare this case with a 2008 Düsseldorf case. The service request originated from a US private enforcement action in an anti-trust matter. The German Federal Cartel Office (Bundeskartellamt) has fined the German defendants for anti-competitive behaviour, and the US parties alleged that they were victims of the cartel, seeking treble damages in the US. As the US claimants were private parties, unlike the New Zealand claimant, the matter did qualify as a civil action, and service was held to be valid.

In short, the case law that developed in Germany over the last couple of years provides robust guidelines on how to deal with US service requests. German courts will allow service in all civil and commercial matters, the peculiar and often frightening aspects of US law and civil procedure that were invoked as a defence notwithstanding.