Chettri v. Nepal Bangladesh Bank, Ltd., 10 Civ. 8470 (S.D.N.Y. Sept. 2, 2014) [click for opinion]

This case arises out of a contract for the purchase of military and police equipment between the Government of Nepal and various corporations. The corporations filed suit in the Southern District of New York against Nepal’s department of revenue and central bank, claiming they wrongfully froze the transferred funds.  The court entered a $1 million default judgment against the governmental entities. 

The governmental entities moved to vacate the default judgment on the ground that Plaintiffs had not complied with the service of process requirements under the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. § 1602 et seq.  Plaintiffs responded that they substantially complied with the statute and that any defects in service should be excused because the entities had actual notice of the lawsuit.

Nepal’s department of revenue is a department within Nepal’s Ministry of Finance, and qualifies as a political subdivision under the FSIA.  The acceptable methods of serving process on Nepal’s department of revenue are thus enumerated in § 1608(a).  Plaintiffs provided no evidence they complied with any of them.  There was no evidence of any “special arrangement for service” between themselves and the Nepalese government, no evidence that service was attempted through an “applicable international convention on service of judicial documents,” no evidence that they requested the clerk of the court to mail the summons and complaint together with a translated copy of those documents to Nepal’s Minister of Foreign Affairs, and no evidence that they asked the U.S. Department of State to effect service “through diplomatic channels.” The court emphasized that because service on a foreign state or a political subdivision of a foreign state under must strictly adhere to the terms of § 1608(a), Plaintiff’s argument that the department of revenue had “actual notice” of the lawsuit lacked merit.

As for service on the bank, service was likewise improper.  Because the central bank is an “agency or instrumentality” of Nepal, Plaintiffs were required to comply with § 1608(b) of the FSIA, which permits service in one of three ways.  The court found that none of these ways had been complied with.  No “special arrangement for service” existed between Plaintiffs and the bank.  Neither the individual whom Plaintiffs purportedly served at the Consulate in New York nor the Consulate itself was authorized to accept legal process on the bank’s behalf.  And, although they sent mailings of the summons and complaint to the bank and the Consulate of Nepal, those mailings did not provide for a return receipt as required by § 1608(b)(3)(B), were not “reasonably calculated to give actual notice” because they were addressed to employees not authorized to receive service, were not translated into the official language of Nepal, and were not “dispatched by the clerk of the court.”

While some courts have required only “substantial compliance” when it comes to serving foreign instrumentalities under § 1608(b), the court found that in this case Plaintiffs failed even that standard, since the person Plaintiffs served was not authorized to accept legal papers for the bank. Accordingly, the court voided the default judgment for lack of proper service.

Michael Atkins of the New York office contributed to this summary.