A process agent (which also may be referred to as agent for service or contract agent) serves as a point of contact for parties to an international commercial or financial contract in the jurisdiction where the parties may not have a presence so that legal process arising out of the transaction’s operative agreements may be served. The jurisdiction is negotiated by the parties and can vary depending upon each party’s country of origin and the location of assets being pledged as collateral. New York and the United Kingdom are often common choices, due to each jurisdiction’s recognized body of commercial law and established precedent in large global financial transactions. The choice of either New York or English law can provide a degree of predictability, fairness, neutrality and justice for the resolution of any potential dispute. (See our previous blog post, Consenting to Jurisdiction: Forum Selection Clauses and the “Minimum Contacts” Requirement.)
Once the parties select a jurisdiction, the party or parties being required to appoint the process agent must decide whether to hire a professional process agent or, if they have an office or branch in New York, for example, whether to include their branch office address in the governing law and consent to jurisdiction clauses of the financing agreements. One benefit of using a contact and the address of a branch office is that you will save paying the annual fees associated with naming a process agent. While such fees are not very high relative to the significance of the financing, they can add up if the lender requires that a large number of entities (i.e., one borrower and 9 guarantors) appoint a process agent for each year of the term of a loan agreement and related documentation.
Factors to Consider When Deciding Whether to Engage a Professional Process Agent
The following are some important factors to consider when deciding if you will engage a professional process agent or “self-represent” through an affiliated branch office. In either case, the process agent named should:
- Maintain tight internal controls: The process agent must have a tight internal control system to manage process agent appointments by transaction during the designated term.
- Understand limited scope of role: The process agent’s role is limited only to receive and forward any legal process or notices. The process agent must understand what documentation it is required to receive on behalf of any company it represents and, equally important, what it should not receive.
- Respond and act quickly: The process agent must understand the time sensitivity of notices and legal proceedings received and have a strict protocol to ensure delivery to the designated contact for each appointing party. Any delay in responding may result in a default judgment.
- Capable of assisting with amendments: The process agent may need to work with the appointing parties to amend an original appointment agreement regarding the term, adding additional appointing parties or replacing parties when, for example, the company requires an amendment to an existing loan agreement to extend the term.
When reviewing your options regarding the most cost-effective solution for naming a process agent, it is important to consider the above requirements. Choosing to use of a branch office that is not staffed to fully support the appointment as process agent from inception to the termination of the financing obligation may be a more favorable financial decision initially, but may result in additional risks and/or costs at a future date.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.