Foreign Corporations Beware! Recent Rule Changes Make it Easier to Initiate Criminal Proceedings Against Foreign Organizational Defendants
As of December 1, 2016, the federal government’s ability to initiate criminal proceedings against foreign corporations became less complicated. Amendments to Federal Rule of Criminal Procedure 4 (“Criminal Rule 4”) took effect, placing between the cross-hairs foreign organizational defendants that lack a U.S. presence. Such companies were outside the jurisdiction of federal courts—until now.
Because there was no effective process for serving a federal criminal summons on a foreign organizational defendant, the U.S. Department of Justice (“DOJ”) urged “necessary” changes to the Criminal Rules “to effectively prosecute foreign organizations that engage in violations of domestic criminal law,” lest Criminal Rule 4 become an “impediment to prosecution,” giving foreign corporations an “undue advantage” over the U.S. government with respect to service of a summons and, by extension, the exercise of jurisdiction over a putative defendant.
The Prior Version of Criminal Rule 4
Criminal Rule 9 governs service of a summons on an indictment, and requires compliance with Criminal Rule 4 when serving the summons on a criminal defendant. See Fed. R. Crim. P. 9(c)(1)(A). The old Criminal Rule 4, however, restricted the scope of extraterritorial service in significant respects.
Under old Criminal Rule 4, a “warrant [could] be executed, or a summons served, within the jurisdiction of the United States or anywhere else a federal statute authorizes an arrest.” The plain language thus generally limited service of a summons to the territorial jurisdiction of the United States.
The old Criminal Rule 4 contained additional requirements to perfect service upon organizational defendants. The U.S. government had to (i) deliver the criminal summons “to an officer, to a managing or general agent, or to another agent appointed or legally authorized to receive service of process” (the “Delivery Requirement”), and (ii) mail a copy of the summons to the corporation’s “last known address within the district or to its principal place of business elsewhere in the United States” (the “Mailing Requirement”).
When the U.S. government failed to meet these requirements, a defendant was able to argue that personal jurisdiction did not attach, that service of the summons should be quashed, and even that the indictment should be dismissed.
The Amended Criminal Rule 4
The new Criminal Rule 4 states that “[a] summons to an organization under Rule 4(c)(3)(D) may also be served at a place not within a judicial district of the United States.”
A summons is served on an organization not within a judicial district of the United States:
by delivering a copy, in a manner authorized by the foreign jurisdiction’s law, to an officer, to a managing or general agent, or to an agent appointed or legally authorized to receive service of process; or
by any other means that gives notice, including one that is:
a. stipulated by the parties;
b. undertaken by a foreign authority in response to a letter rogatory, a letter of request, or a request submitted under an applicable international agreement; or
c. permitted by an applicable international agreement.
As evidenced, this new rule provides for service of a summons by a variety of means, such as pursuant to the foreign jurisdiction’s law or another mechanism. That may include an agreement between the parties or an international agreement, such as a Mutual Legal Assistance Treaty (“MLAT”), or “any other means that gives notice.”
As the list of means of service is non-exhaustive, the DOJ has tremendous flexibility in cases where the enumerated means may be prohibitively difficult. The rule also does not require judicial approval of the “other means” before the DOJ serves a summons in a foreign country, though post hoc challenges to the sufficiency of any unenumerated methods of service may be available.
There are additional changes to Criminal Rule 4 worth noting. Criminal Rule 4(a), which previously had no provision for organizational defendants that fail to appear in response to a criminal summons, now provides that “a judge may take any action authorized by United States law” should an organizational defendant fail to appear in response to a summons.
Finally, the Mailing Requirement for service on organizations with U.S.-based agents, principal places of business, or mailing addresses has been amended to eliminate the need for a separate mailing to an organizational defendant when delivery has already been made to an officer of the company or to a managing or general agent, unless required by statute.
The amendments to Criminal Rule 4 may be summarized as follows:
Foreign organizational defendants may be subject to service of a federal criminal summons even without a U.S. presence.
The DOJ has a wide array of tools at its disposal to effectuate service on foreign organizational defendants.
Non-U.S. entities that fail to appear in response to a criminal summons are subject to default judgment, debarment, and other remedies.
The amendments govern in criminal cases filed after December 1, 2016 and “insofar as just and practicable, all proceedings then pending.”