As the shipping community is truly internationally based, issues can often arise when a formal claim is issued in the English High Court that then has to be served outside the UK jurisdiction.
For example, if a dispute arises between a ship owner based in Singapore and a Charterer based in Morocco due to unpaid demurrage, and the voyage charter provides that any dispute shall be governed by English law in the High Court, then it is likely that any formal claim by owners will need to be served outside the jurisdiction in Morocco.
This is especially the case where a legal representative has not been appointed by the defendant Charterer or where the legal representatives do not have authority to accept service on the defendant’s behalf.
The requirement for service
As a basic principle of English High Court procedure, a defendant must be made aware of any claim made against him. The documents issued in court proceedings must be brought to the defendant’s attention (often referred to as “service”).
The ultimate aim of the service requirements contained within the Civil Procedure Rules (“CPR”) are that, insofar as possible, the documents actually come to the attention of the party being served. If the defendant is based within the UK, then this is a relatively straightforward process of either personally serving, posting by first class post or DX, leaving the document at a specified place, by fax or other electronic means or by any of the statutory methods. However, it often becomes a complex and time consuming process, when the defendant is based outside the UK jurisdiction.
Alternatives to service out of the jurisdiction
The recent Commercial Court case of Teekay Tankers Ltd v STX Offshore & Shipping Co1 highlights that a party should consider whether there is an alternative to serving a defendant outside of the jurisdiction. This is an important consideration and is not one that should be taken lightly. A party who is able to avoid serving outside of the jurisdiction, is likely to save significant time and costs in serving outside the jurisdiction.
Teekay Tankers Ltd (“Teekay”) is a publically listed shipping company incorporated in the Marshall Islands, which owns and operates a fleet of tankers, and STX Offshore & Shipping Co (“STX”) is a company incorporated in the Republic of Korea, which operates a number of shipyards in South Korea. The dispute arises pursuant to STX’s bid for contracts for the construction of 113,000 DWT crude/product ready oil tankers (the “Tankers”).
On 15 March 2013, STX and Teekay entered into a letter of intent which provided that Teekay’s subsidiaries agreed to purchase four firm units of the Tankers and STX agreed to build the same. Furthermore, STX agreed to grant Teekay options to enter into contracts for a further three sets of four units of the Tankers. Pursuant to the letter of intent, on 5 April 2013, a package of contracts were concluded to include a Shipbuilding Contract and an Option Agreement.
The dispute arose as STX failed to provide the Refund Guarantees requested under the shipbuilding contracts as it proved impossible for them to procure their issue in the form stipulated in the Shipbuilding Contract. On 18 December 2013, Teekay terminated the Shipbuilding contracts and alleged that STX were in repudiatory breach of contract. Subsequently, Teekay commenced LMAA arbitrations in accordance with the shipbuilding contracts.
Teekay purported to exercise its first and second options for four Tankers on 2 October and 22 November respectively. STX refused to enter into the contracts for the option Tankers on the basis that it would be unable to procure the refund guarantees. Instead, STX contended that the Option Agreement was void or unenforceable. On 6 February 2014, Teekay terminated the Option Agreement, again on the basis of STX’s repudiatory breach. Teekay issued a Claim Form on 11 April 2014 claiming damages in the sum of US$179 million, plus interest and costs. STX applied to the Court, under CPR 11, challenging the jurisdiction of the English Court to hear the claim.
The Commercial Court considered whether or not the Claim Form was validly served by Teekay upon STX. As stated above STX is a company incorporated in the Republic of Korea. The Claim Form was served on STX’s London address on a Mr Kang pursuant to section 1139(2) of the Companies Act 2006 (the “2006 Act”) and/or CPR6.9(2)2.
With effect from 3 March 2014, STX had been registered with Companies House as having established a UK establishment in the UK pursuant to section 1046 of the 2006 Act. Furthermore, Mr Kang was identified on the Companies House company registration form as a person authorised to accept service of documents in the UK.
STX argued that the service of documents was not effective pursuant to the 2006 Act as the claim was not in respect of the UK establishment and, was instead, a claim in respect of the Korean establishment. Furthermore, that in allowing service upon a local office of a company the overseas company would be deprived of the extended timescales for the provision of a response which apply in respect of service abroad.
The Court held that service upon Mr. Kang at STX’s UK address was good service pursuant to section 1139(2) (a) of the 2006 Act. The Court also held that the London address was a place of business at which STX was validly served pursuant to section 1139(2) (b) of the 2006 Act and/or CPR 6.9(2).
If service on a company under the CPR (at any place of business of the company in the UK) or 2006 Act (as discussed above) is not possible, a claimant should consider if service can be carried out by an alternative method within the jurisdiction, for example, by a contractually agreed method within the contract of carriage (e.g. a service provision providing that a Claim Form and Court documents may be served by a certain method, such as by email or to a nominated lawyer within the UK) or on the agent of an overseas principal (an application to court must be made to serve the claim form relating to the contract on the defendant’s agent within the jurisdiction).3
Service outside the jurisdiction
If a Claim Form is to be served outside of the jurisdiction it must be served within 6 months of the date of issue4.
In order to serve a Claim Form outside of the jurisdiction, a claimant will need to consider (once any necessary permissions for service out of the jurisdiction are obtained) which methods of service are available to them. The following are examples of the service options which may be available5:
- the EU Service Regulation, which provides for judicial or extrajudicial documents to be transmitted from one Member state to another for service there;
- any Civil Procedure Convention (including bilateral treaties and the Hague Service Convention on the Service Abroad of Judicial and Extrajudicial documents). The Hague Service Convention establishes a mechanism for service of judicial documents between contracting states (in most cases this is carried out by a central authority, in England and Wales this is the Senior Master, whose obligations are undertaken by the Foreign Process Section);
- if the law of the relevant country permits, through the judicial authorities of that country or through a British Consular authority in that country;
- any method permitted by the law of the country in which it is to be served; or
- on a state or government body in accordance with CPR 6.44 (service by this method is usually arranged by the Foreign and Commonwealth Office, upon receiving a request for service accompanied by the necessary documents, to include translations (if required)).
In all cases, a claimant must ensure that service is carried out in accordance with, and by a method that is permitted within the law of the country in which the Claim Form is to be served. CPR 6.40(4) stipulates that the Court can not authorise or order any method of service that is contrary to the law of the foreign country.
It should be noted that service by any of the above methods can take many months and advice should be obtained from local lawyers and/or the judicial authorities as to how long service is likely to take. If service is likely to take longer than the period of validity of the Claim Form, an application should be made (accompanied by evidence of the likely time frame in which service is likely to take place) to extend the Claim Form’s validity.
Each case will vary depending on the facts of the case and where the respective parties are based. It is therefore important to:
- establish where the defendant is based and consider whether you might need to serve outside the jurisdiction. It may be necessary to employ the services of an investigative agent if the registered address of the defendant cannot verily be established. If so, consider whether or not the Court’s permission is required;
- consider whether or not there are any alternatives to having to serve outside of the jurisdiction, for example on a UK branch of the foreign defendant, or on a UK legal representative of the defendant who is authorised to accept service; and
- obtain local lawyers’ advice. If service out of the jurisdiction cannot be avoided, local lawyers can estimate a timeframe for service (so that any applications to extend the validity of the Claim Form may be made) and ensure that the method of service you wish to adopt is valid in accordance with the law of the country in which the Claim Form and accompanying documents are to be served.