By Michael Komuczky
The challenges to interpreting laws and contracts in an international setting.
In any legal relationship, the affected parties’ rights and obligations are expressed through language – all of which need to be interpreted. Even if only one language is involved, there is ample potential for disputes. When several languages are involved, it can be a wild ride.
Multilateral international treaties are usually concluded in various language versions. Commonly, the treaty addresses this by stipulating that all recognized versions shall be equally authentic. For UN treaties, all six of its official languages are used. Legislative instruments of the EU are usually authentic in all 24 (!) of the Union’s official languages.
It goes without saying that this can cause uncertainties. To give one example: A question debated in legal doctrine is whether the EU regulations on conflict of laws – most notably the Rome Regulations – only bind national courts (state courts), or whether arbitral tribunals within a member state also have to apply them. One argument against is that the German text of recital (Erwägungsgrund) 8 of the Rome II Regulation states that it only applies to a “Gericht”, i.e. a state court. However, the English version (like the French) states “court or tribunal,” which arguably also includes arbitral tribunals. The Spanish version speaks of órgano jurisdiccional (judicial organ), which excludes arbitration from an organizational
point of view, yet includes it in a functional sense. Other language versions also contain terms that support one side or the other.
This issue has, in fact, not yet been resolved. In general, due to these language problems in international law and EU law, the exact wording of a legal text is of less importance than it is under domestic law. While the European Court of Justice (ECJ) considers the wording of a legal text, its reasoning is usually based on the norms involved and analyzes its telos, or purpose. For the question raised above, the ECJ would most likely not invoke recital 8 but consider system and purpose of the Rome Regulations.
Private parties also face challenges in cross-border cases. When contracts are drafted in more than one language, the parties often stipulate that in case of discrepancies, one language shall take precedence over the other. This avoids problems with equally authentic, yet contradictory, texts. Commonly, the lingua franca known to both parties is chosen, typically English. However, other uncertainties may stem from that. English has a rich vocabulary, which is considerably larger than the vocabulary of either French or German. Often, terms have various synonyms with slightly different meanings (e.g. liberty/freedom). English is also used in different jurisdictions, where a term may have a slightly different (legal) meaning.
Especially if one or both parties to a contract are not native English speakers, they may have different understandings of a word. And if the applicable law is not the law of an English-speaking country, this law’s technical terms may not fit to the English contract terms.
To illustrate: When an Austrian or German company does business with a foreign company, the contract is frequently drafted in English, while the applicable law will be the law of the home state of one side. So provisions for “indemnity claims” run into difficulty: “Indemnity” usually means claims for damages for civil torts or breach of contract. In German, this is translated as Schaden(s)ersatz. However, in the case of a commercial agent’s contract, the English version of an EU directive uses “indemnity” for a specific remedy after the termination of such a contract, which may be claimed in addition to damages. The remedy is called Ausgleichsanspruch in German. The directive contrasts this claim to “compensation”, which is translated as Schadensersatz. So is the parties’ “indemnity” an Ausgleichsanspruch or a Schaden(s)ersatz?
If both parties are from the EU, they most likely intended the terminology of the EU directive. However, if one is not from a member state, it can be questionable whether the parties wanted to incorporate such an Ausgleichsanspruch, particularly if this remedy is unknown under the chosen law. As the question is usually worth several hundreds of thousands of euros, it is of great interest.
Through careful drafting of the contract, the potential sources of disputes can be significantly reduced, if not excluded completely. Especially for international contracts – when the costs of potential litigation are usually high – parties are well-advised to seek assistance of internationally versed lawyers with experience in such matters.
Michael Komuczky is an attorney at law at the international law firm Lansky, Ganzger and Partner (LGP). He specializes in contract law and the resolution of contractual and non-contractual disputes before courts and arbitral tribunals, with a focus on cross-border cases.