Circumventing the more traditional methods of service, the English court permitted alternative service of English court proceedings on a Turkish state organ via the London office of a UK law firm which represented certain other co-defendants (but not the state organ itself) on the basis that the co-defendants were closely associated with the state organ. The decision potentially opens up another service option for litigants finding it difficult to serve proceedings on a state party: Koza Ltd & anr v Akcil & ors [2018] EWHC 384 (Ch), 26 February 2018

The first claimant was an English subsidiary of a large Turkish company (the Company). Pending an investigation in Turkey into allegations against the Company group, an organ of the Turkish state (SDIF) appointed interim trustees (the Appointees) to replace the board of the Company. Disputes arose regarding the management and control of the first claimant, which commenced English proceedings against the Company, SDIF and the Appointees.

A key issue concerned service on SDIF, the state organ. A UK law firm represented the Appointees but not SDIF, the state organ.

The English claim form was couriered to SDIF’s office in Turkey by way of information. However, formal service had to be effected under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Convention). Turkey is a signatory to the convention, but had limited the means by which service could be effected on Turkish parties to official channels in Turkey, specifically the General Directorate of International Law and Foreign Relations at the Ministry of Justice.

The claimants alleged that the Turkish Ministry of Justice had co-operated with Turkish officials to confiscate the first claimant's funds and so could not be relied upon to effect regular service of English court proceedings on SDIF under the Hague Convention. The claimants therefore sought, in the alternative, an English court order that: (i) serving the proceedings on the Appointees via the law firm's London office also amounted to service on SDIF; (ii) the delivery of the proceedings to SDIF’s offices in Turkey amounted to good alternative service; and (iii) alternative service could be effected by courier or post to SDIF’s Turkish offices. This article deals only deals with (i), which is the more unusual form of alternative service requested.

Test for alternative service in a Hague Service Convention case – “good reason”

The court found, in the face of conflicting authority, that the test for alternative service under CPR r6.15 in a Hague Convention case is a “good reason”. This does not require exceptional or special circumstances. However, in a Hague Convention case, the more restrictive the relevant state had been in what it regarded as appropriate service, the more cogent the reason would have to be to be a “good reason” for service within r6.15.

In applying the good reason test to the facts, the court held that a delay of five months in service or a deterioration of the political situation in Turkey were insufficient to justify alternative service. However, the claimants’ allegation that the Turkish Ministry of Justice had co-operated with Turkish officials and therefore could not be relied upon to effect regular service under the Hague Convention was deemed significant. In this regard, the court stated that it was not in a position to make any finding as to the validity of the claimants' allegations of collusion to confiscate property which formed the substance of the dispute in the proceedings. However there was ample material before the court to show that there were real grounds for concern that regular service under the Hague Convention might never produce service at all or result in a long delay. In particular, the court found that there was obstruction by the Turkish state organs involving service of documents in other contexts and that it was reasonable to infer that the Ministry of Justice would be obstructive in this context as well.

Alternative service on state organ through co-defendants’ solicitors

As to the mode of service, the law firm argued that the application for an order that service on the Appointees via the law firm’s London office also amounted to service on SDIF:

  • was an unprecedented attempt to serve a party to the proceedings via a law firm which did not act for them; and
  • “there is a possibility, at least, of difficulty, to put it in low key and relatively neutral terms, for [the law firm] if they were confronted with that position.”

Whilst noting that there would or might be quite considerable issues for the law firm if they received material intended for service on a non-client, and sought to disregard it, the court made the order. The court acknowledged that SDIF and the Appointees were not the same. It also accepted that the law firm was not in fact in direct contact with SDIF. However the court observed that it was aware that the directors of the Company (ie the Appointees) were in fact appointees of SDIF. Further it was clear that the Appointees had to be able to make contact with SDIF and report back to SDIF. The court went on to note that while “the firm [sic] could easily be acting on instructions from the individual directors [ie the Appointees] without contacting the SDIF, in the real world the SDIF and these directors are plainly very closely associated, in both legal and practical terms”.

Comment

The rather unusual order to permit service through solicitors who were not in fact instructed by the state organ raises questions as to whether, and in what circumstances, such orders may be made in future cases. The degree of nexus required to establish a “close connection” here related to the relationship between the appointed directors and the state organ (who had appointed them). It is not hard to imagine other scenarios where a state entity’s involvement with a commercial enterprise at board level could give rise to a similarly close connection.

There are questions as to what obligations, if any, solicitors owe non-clients in circumstances where the solicitors are deemed an alternative medium of service on such non-clients. As to this, in the last paragraph of the decision, the court emphasised that it was not making an order that service on the law firm amounted to service on SDIF. Rather, the order requested was that service on the Appointees (via the law firm) constituted service on SDIF. It is important to be mindful of this distinction.