Article

Note: In 2005, the Rice Corporation (Seller) contracted with the Grain Board of Iraq, a foreign state company, which was overseen by the Iraqi Ministry of Trade (Buyer), for the sale and purchase of rice. Payment was to be via LC. Prior to shipment, Buyer drew on the LC for 85% of the purchase price and was to receive the balance upon delivery. Buyer refused to take delivery of the shipment and Seller, after a forced liquidated sale of the shipment, sued Buyer for reimbursement of its losses in the U.S. District Court for the Eastern District of California.

Pursuant to a court order in 2006 for "substituted service of process upon each Defendant under the Foreign Sovereign Immunities Act," the Seller served process by regular mail to a post office box in Iraq and by email. When Buyer did not respond, Seller filed a motion for default judgment in 2007 and the Magistrate Judge filed Findings and Recommendations in 2008 advising that such judgment be entered. The Findings and Recommendations were served on Buyer who responded with objections, arguing that the service of process was defective so that no jurisdiction exists.

The Judge rejected the Findings and Recommendations, ruling that where service of process is made against an instrumentality of a sovereign, it must be consistent with that state's law. Because Buyer was a "'political subdivision' of Iraq," the matter was controlled by the Foreign Sovereign Immunities Act (FSIA) and therefore "service must be 'consistent with the law of the place where service is to be made,'" 28 USC §1608(b)(3)(C), namely Iraq. The Judge took note of unrebutted testimony by the "Director General of the Legal Department of the Ministry of Justice of the Republic of Iraq" to the effect that under Iraqi law, "that which is not expressly permitted by statute is prohibited." Thus the Judge found that email was not a valid mode of service of process since it was not expressly permitted.

The Judge also found that Seller's serving of process by express mail was not valid because "[t]he FSIA prescribes that '[s]ervice shall be deemed to have been made...as of the date of receipt indicated in the certification, signed and returned postal receipt, or other proof of service applicable to the method of service employed,'" 28 USC §1608(c)(2), and no such certification was received by Seller.

Comment:

Even where defendants do not answer a complaint, they can challenge the absence of personal jurisdiction even after a default judgment has been entered.

[JEB/plc]

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