- within Corporate/Commercial Law topic(s)
- with Inhouse Counsel
- in Canada
- with readers working within the Metals & Mining and Law Firm industries
In cross-border transactions, it is increasingly common for non-local parties to a contract to appoint a process agent, often referred to as an agent for the service of process, to act as a local representative authorised to receive (and deliver), amongst others, judicial and other official documents on behalf of the said non-local parties. This practice has become a somewhat standard feature in cross-border transactions because it bypasses the requirement of serving and delivering documents to the non-local party through international channels, which procedure can be perceived as costly and procedurally burdensome.
The use of process agents is particularly common in security transactions where non-local security givers enter into Maltese law governed security agreements (for example pledge agreements) and the security-taker would typically seek to ensure that the non-local security giver appoints a local representative so that notifications that need to be sent in terms of and in accordance with the said security agreement can be served on the local representative rather than on the foreign party, thereby avoiding the need to rely on EU regulations (as defined below) and/or the Hague Convention (as defined below) for cross-border service.
While the process agent has proven to be a convenient legal tool for parties to a cross-border transaction, its rise to prominence begs a number of legal queries. Said queries surround principally the following matters:
- the legal classification of the process agent, that is, whether it can be classified under the contract of mandate or another form of nominate contract or whether it can be considered to have a sui generis nature;
- the duties and obligations that such a role carries with it; and
- the role of the process agent under Maltese procedural law, in particular with respect to the service of judicial acts upon corporate entities.
The Process Agent as a Mandatary
Under Maltese law, the concept of a process agent does not emanate from any particular statute regulating process agents. Maltese courts have classified the engagement of an array of professionals under the contract of mandate, such that lawyers have, in jurisprudence, been considered mandatories of their clients, and directors have been considered mandatories of the company of which they were appointed as such. By analogy, therefore, the legal basis for the appointment of process agents may likewise be read by reference to the general principles of the law of mandate under article 1856 et seq of the Civil Code, Chapter 16 of the Laws of Malta. The process agent can thus be classified as the mandatary in Malta of the non-local party to a contract, empowered by such non-local party to receive documents on its behalf.
Under the Civil Code a mandate or procuration is, by definition, a contract whereby one person (the mandator) gives another (the mandatary) the power to do something for him. The mandate is special when the mandatary is authorised for one matter or for certain matters only, and general when the mandate is given for all the affairs of the mandator. The things which the mandatary is empowered by the mandator to do must be lawful, and must be acts which the mandator might have done himself. Save where otherwise specified in the law, such contract need not be in writing and can even be granted tacitly. However, it is not perfected until the mandatary has accepted the mandate, which acceptance may, unless otherwise stated in the law, be tacit and inferred from the mandatary's acts.
A mandate is generally revocable at the discretion of the mandator. However, Maltese law also recognises the concept of an irrevocable mandate granted by way of security. This form of mandate must be in writing (on pain of nullity). Whenever a mandate is expressly stated to be granted by way of security in favour of the mandatary or of any other person, and that it is irrevocable, the mandate may only be revoked with the consent of the person whose interest is secured thereby. The mandatary under such an irrevocable mandate granted by way of security, shall be bound to act in a fair and reasonable manner when exercising the powers granted thereunder, provided that such a mandate may only be granted when the object to which it relates is property which is movable, by nature or by operation of law.
Duties of Process Agents
Under Maltese law, the duties of a process agent arise from the contract of mandate. A mandatary appointed as process agent is obliged to carry out the mandate in the manner that has been expressly or tacitly prescribed by the mandator. He cannot do anything beyond the limits of his mandate. In the event of non-performance or the process agent exceeding the limits of his mandate, the process agent as a mandatary is liable for damages and interest. Furthermore, a mandatary is answerable not only for fraud but also for negligence in the performance of the mandate. However, the law provides that liability for negligence is applied less strictly where the mandate is gratuitous than where the mandatary is remunerated. If no negligence is imputable to the process agent, it will be the mandator that is liable to indemnify the process agent for any losses he has sustained by reason of his mandate.
Additional duties include the obligation to provide the mandator with an account of the mandatary's management and of all items received by virtue of the mandate, unless the mandator expressly waives this requirement. The broader the powers of the mandatary, the greater the trust that is vested in him by the mandator, and thus, the greater the obligation of the mandatary to act in the best interests of his mandator. By virtue of the law of mandate, the process agent is also duty-bound to give notice, without delay, to the non-local party appointing him of his refusal to accept his mandate. Otherwise, unless there is just cause occasioning such delay, the process agent would be answerable to the mandator for damages occasioned by the delay. Another important rule is that the mandatary may not substitute another person in their place unless expressly authorised to do so by the mandator – delegatus not potest delegare.
These obligations under the Civil Code reinforce the principle that the process agent must act with diligence and good faith, promptly forward any notices or judicial acts received, and comply with any instructions issued by the mandator within the limits of the mandate.
Service of Judicial Acts under the COCP (as defined below)
In default of the appointment of a process agent, the service of judicial acts on a party to an agreement which is absent from Malta is governed by supranational legislation. Where service is to be effected from or to another Member State of the European Union, Regulation (EU) 2020/1784 of the European Parliament and of the Council of the 25th of November 2020 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents) (recast), and the Council Regulation (EC) No. 1393/2007 of the 13th of November 2007 on the service in the Member States of judicial and extrajudicial documents in civil or commercial matters (service of documents) (collectively the "EU Regulations"), shall apply. Furthermore, the Hague Convention of the 15th of November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the "Hague Convention") governs the service of judicial acts between Malta and the contracting states to the Hague Convention. Both the EU Regulations and the Hague Convention require judicial acts to be transmitted through national authorities appointed for that purpose, the Office of the State Advocate being the office so designated in Malta.
The appointment of a process agent in Malta, therefore, is often perceived as an inexpensive and expedient alternative that eliminates the cross-border element of the service of judicial acts and therefore circumvents the need to resort to the procedures envisaged in the EU Regulations and the Hague Convention. When the documents to be served upon the non-local party (the mandator) are judicial acts, the function of the process agent, that is, to be served with documents on behalf of his mandator, is intrinsically linked with local procedural law, more specifically the rules on service of judicial acts envisaged in article 181 et seq of the Code of Organisation and Civil Procedure, Chapter 12 of the Laws of Malta (the "COCP").
According to the COCP, for judicial acts filed before the Courts of Malta to be lawfully served on bodies with separate legal personality (including therefore companies), copies of such judicial act must be left by a court executive officer at the company's registered office, principal office, or place of business or postal address with any of the following:
- with the person or persons vested with the legal or judicial representation of the entity,
- with any company secretary;
- with any other person duly authorised in writing to file judicial acts on the body's behalf or to make any sworn declaration, sworn reply or sworn pleading, or
- with an employee of such body.
The individuals mentioned in (i) to (iii) above can also validly receive service on behalf of the company wherever they may be found, and a copy of the act may also be validly left at their place of residence or business or place of work or postal address with a member of their family or household or with a person in their service or with their attorney or person authorized to receive their mail.
It is within these parameters, therefore, that service on the process agent must be made, in all likelihood as an individual duly authorised in writing to file judicial acts on the body's behalf or to make any sworn declaration, sworn reply or sworn pleading (see (iii) above).
Maltese Courts have considered procedural rules under the COCP to be a matter of public order that must be observed to the letter. It is to be ensured, therefore, that where a local representative is appointed as a process agent for non-local parties to contracts governed by Maltese law, such appointment complies with the Maltese law rules on mandate and service of judicial acts, such that it cannot be said that the parties created an alternative method of service not recognised by the COCP. For that to happen, the mandate in favour of the process agent must be properly constituted and accepted in terms of the rules of mandate above-discussed, such that the process agent may be considered as an individual duly authorised in writing to file judicial acts on the foreign party's behalf and to make any required declaration, sworn reply, or sworn pleading. Only then would such an individual be authorised to receive valid service for the foreign corporate entity in terms of the COCP.
Practical Considerations in the Appointment of Process Agents
Having reviewed the contractual relationship underlying the appointment of a process agent, the duties emerging from such appointment, and the procedural rules governing his functions, it is opportune to mention practical considerations to be kept in mind in the appointment of this mandatary.
The appointment of a process agent by a foreign mandator is typically incorporated into the operative part of the agreement in question. A well-drafted appointment clause would: (i) clearly identify the local mandatary, (ii) specify the scope of the local mandatary's authority as process agent, including an authorisation to file judicial acts on the foreign mandator's behalf or to make any required declarations, sworn replies, or sworn pleadings, and (iii) oblige the local mandatary to notify the foreign mandator in case of any changes to its address.
Where the mandate is expressed as an irrevocable mandate granted by way of security, compliance with the Civil Code is essential, particularly with regard to the treatment of movable versus immovable property. Moreover, if the appointment is made by irrevocable mandate granted by way of security, it must be made in writing, failing which the appointment would be null and void. Even where the mandate is revocable, written documentation of the appointment is recommended as best practice. Acceptance by the mandatary is another key aspect of the appointment. While acceptance may be tacit by law and need not be in writing, best practice dictates that the foreign mandator obtains a written acceptance letter from the local mandatary.
Ultimately, ensuring that the appointment of a process agent complies with Maltese law requires careful alignment of contractual drafting with the principles of the Civil Code and the mandatory procedural rules of the COCP. When properly structured, the process agent mechanism provides an efficient and reliable method of receiving notices and judicial acts and reduces the procedural burdens associated with cross-border service.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
