UPC Insights: Divisions disagree on rules for service on non-European defendants

Case and Decision

In a case against a number of Chinese and German Xiaomi entities, the patentee (Panasonic) sought a ruling, under Rule 275.2 of the RoP, that service of the Statement of claim at the registered office of a German Xiaomi defendant also constituted proper service on the Chinese Xiaomi defendants. The patentee argued that the share capital of the Chinese and German Xiaomi defendants is ultimately owned by the same parent company; that the group of defendants presents itself as a unit; and that the German Xiaomi defendant concludes transactions on behalf of its Chinese mother company; that one of the Chinese defendants conducts FRAND negotiations on behalf of the entire group; and that all of the defendants would be aware of the complaints, as shown in statements made in other proceedings. Based on all these circumstances, Panasonic asked the Court to rule that service on the German defendant also constitutes proper service on the Chinese ones, under Rule 275.2 RoP. The patentee argued that the Munich Division had allowed such way to proceed in a similar case (UPCCFI5/2023 – ORD_576855/2023).

The German Xiaomi defendant replied that allowing service pursuant to Rule 275.2 would violate fundamental procedural guarantees, and that service according to that Rule only constitutes a subsidiary method to the regulations applicable to service abroad, which must be attempted before any application under Rule 275.2 is made.

The request under Rule 275.2 is dismissed.

According to the Mannheim Division, the patentee’s argument is clearly contrary to the wording of Rule 275. Pursuant to Rule 275.1, an alternative service can only be contemplated if a regular service attempt, pursuant to Rules 270-274, has been made. In the present case, service attempt pursuant to Rules 273 and 274 (service outside the contracting member states), in particular pursuant to the Hague Convention, is a mandatory prerequisite. However, such an attempt has not taken place. The Division also notes that “the Registry of the local chamber has so far requested the documents required for service, in particular translations, from the plaintiff” but that “these have not yet been submitted by the plaintiff to effect service abroad”.

The Mannheim Division also explicitly states its disagreement with the stance taken by the Munich Division in the previous case. According to the Mannheim ruling, given its exceptional nature, “Rule 275.2 RoP cannot be interpreted in principle as permitting service without first having attempted service pursuant to the provisions applicable to service abroad”. The Mannheim Division concludes that Rule 275.2 only applies if an unsuccessful service attempt pursuant to Rules 270-274 has been made and then the Court has allowed alternative service in accordance with Rule 275.1, but that alternative method has also been unsuccessful. According to the Mannheim Division, Rule 275.2 is only “a last resort in individual cases”, which cannot be used to disregard international treaties (such as the Hague Convention) which the UPC must apply pursuant to Article 24(1)(d) UPCA.

Comment

Practitioners know that serving documents outside the European Union is often neither cheap, nor straightforward. Likely in reaction to that, German courts had developed a practice, before the UPC came into force, of liberally allowing alternative methods of service on foreign defendants. They have in particular accepted, in certain circumstances, that service on the German subsidiary can constitute proper service on the non-European parent company as well; or that public service by virtue of display of a notification in the courthouse can be sufficient.

As in many areas, the Rules of procedure of the UPC have taken inspiration from existing national practices. Hence, Rule 275 RoP provides for “Service of the Statement of claim by an alternative method or at an alternative place”, which may be permitted by the Court. Under Rule 275.2, the Court may “order that steps already taken to bring the Statement of claim to the attention of the defendant by an alternative method or at an alternative place is good service”.

According to the present order of the Mannheim Division, the application of Rule 275.2 is however subject to conditions, which are to be determined from the text of the UPC Agreement and Rules of Procedure. Most importantly, according to the Mannheim Division, alternative service under Rule 275.2 requires that regular service has been attempted and failed. In that respect, the present ruling contrasts with the position previously taken by the Munich Division. The latter had indeed held that “alternative service under Rule 275.2 RoP does not depend on whether service under Rules 270 – 274 RoP could not been carried out. Alternative service under Rule 275.2 RoP is also possible while an attempt of service under Rules 270-274 RoP is still underway”. That had led the Munich Division to decide that the transmission of the Statement of claim along with its translation through means other than those provided for by the Hague Convention could be sufficient, without there being a need to evidence an impossibility (or even difficulties) with regular service.

Following the Mannheim decision, parties need to follow a specific set of steps when seeking to have a Statement of claim served:

• First attempt service pursuant to Rules 270-274. This involves in particular diligently providing the Court with all required documents, in particular translations – something the claimant had not done here.
• File an application for alternative service under Rule 275.1. The present ruling leaves it open when such an application can be made, namely only after a notification of the Registry that service could not be effected (see Rule 274.4), or after some reasonable period of time.
• Finally, in case of failure of a service by another method or at another place according to Rule 275.1, file a request under Rule 275.2. Again, the question of the timing between the requests under Rules 275.1 and 275.2 arises.

It is however not certain whether the Mannheim view on this issue will be the final one. This is, indeed, another example of divergence between Divisions, as already discussed in our article Discord about access to court file between UPC Court of First Instance Divisions. The UPC Court of Appeal will therefore need to weigh in. In particular, it must decide (i) whether the mechanism of Rule 275.2 RoP can indeed only be triggered if regular service has been attempted and failed; and (ii) whether alternative service under Rule 275 operates as a single mechanism (set forth in paragraphs 1 and 2 of the Rule), or whether paragraph 2 is also subsidiary to alternative service under paragraph 1.

The question is not without practical importance. It is indeed one of the key promises of the UPC that proceedings will be fast and effective, with the aim of concluding them in one year. A potential delay of several months to effect service of the Statement of claim could be very significant in that context.

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