What server?
We are talking about mnemonic phrases for wallets. The wallet software that generated the seed knows the algorithm, and therefore knows how to convert the phrase into a key or set of keys.
What decryption? Transactions are not generally encrypted. The blockchain is not generally encrypted. The mnemonic phrase is not generally given to you in an encrypted form.
This is because the developers of Electrum know what algorithm blockchain.info is using, and they have decided to implement that algorithm as an option that you can use in Electrum if you want to. However, the developers of Electrum didn't need to implment that algorithm if they didn't want to. This was a choice made by those developers.
Because there is no Bitcoin Company to enforce any rules. Anybody can write any software they want, and you can't stop them.