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Contract drafting and negotiation in multiple languages

Posted by: Laurence Simons 05/11/14

By Pablo Cilotta, International Senior Legal Counsel & Head of Contract Management - EMEA & Latin America

Having managed legal and contractual matters in multiple jurisdictions, I heard over the past years many professionals based in the US and in the UK raising this usual question: “I would like to transition Spanish-speaking customers to English language or at least to set up a dual language contract model … Is that possible?”

Indeed, if we advise companies with operations across multiple geographies or with several business units in the world, we usually find ourselves faced with the need to draft, review and negotiate contracts in other languages.

Under which circumstances? Just to give some examples: when closing sales with foreign companies; when appointing sales agents or distributors who require agreements drafted in other languages rather than English; when celebrating services or employment agreements with parties that perform services overseas; etc.

Clarity in Communication

The purpose of this article is to provide a quick insight about contract drafting and negotiation in multiple languages (not intended to be a general legal advice for all purposes). Let´s start with a rapid reference to the need for clarify in communication during negotiations. Particularly when dealing internationally, misunderstandings happen easily. So we must make sure to be extremely accurate and also aware of cultural norms or expressions.

Plain language makes translation easier

Accuracy and consistency are all more than relevant, but the main benefit of a well-written contract is its clarity.

Business leaders don´t speak technical-legal language, so it is important to draft contracts in terms that are easy to understand, using plain language and avoiding legalese. If this is done, translation into a local language will be much easier.

Keeping paragraphs short, dividing the contract into sections with clear sentences, preferring active voice over passive, avoiding multiple negatives etc- all help with clarity in contract drafting, including for translation purposes.

Beware of cross-cultural differences

When managing cross-border functions in multinationals, we must be prepared to explore diversity in multi-disciplinary teams, identifying the impact of cultural differences in drafting and negotiating international agreements.

Recent research indicates that many American companies fail to focus attention on local culture when expanding into new regions. Worse, during turbulent economic periods, companies often cut the language and cross-cultural training programs once offered to employees.

We must understand the mindset of the people we deal with overseas, and always get local advice on whether or not local laws require mandatory provisions in certain circumstances.

General overview of the Contract Management profession in Latin America

With certain exceptions, small or medium size companies in Latin America usually keep contract drafting under the umbrella of external lawyers who probably do not know the business as they should. Furthermore, they are exposed to risks when they must negotiate a contract in a foreign language, such as English.

I have seen this happen with small organizations in Spain and South America. The contract template brought by the supplier from the US, in its English version, is taken overseas. Then customers in Latin America or Spain - who anticipate reviewing and negotiating in English - find they cannot. Result? An incredible waste of time creating translations, unexpected costs, extra work, having misunderstandings and experiencing the need to review a contract already reviewed. 

Choice of language – the challenge

One of the first things you must evaluate when doing business with foreign parties is whether the agreement should be in English, or the foreign language or both. American corporations doing business abroad require English as the official language for the contract. But English is not always the best choice. For instance, if our goal is to have a potential dispute resolution in a jurisdiction or arbitration forum where arbitrators do not conduct proceedings in English, then without any doubt the choice of contract language will be the other language, not English.

Avoid dual language if possible

Multilingual contract models can be extremely dangerous and we could run severe risks when transplanting and adapting foreign legal concepts. I would always try to avoid dual-language contracts.

My first choice would be to migrate Spanish customers to English, depending on the customers' size and structure and the circumstances of the transaction. Are we selling to a small or medium client? How big are we? Are we buying or acknowledging an alliance partner agreement?

It's critically important to make a comprehensive assessment and then decide to either migrate them to English or create a dual-language system.

If we migrate customers to English we can still discuss issues in local language (via phone, face-to-face meetings, email) while keeping contract templates and reviewing other parties' concerns exclusively in English. In this case, both parties must understand that only the English language will dominate. The other language will be a translation for information only.

If this option does not match the other party's expectations, we have no choice but to implement the dual-language model. Some companies use a two-column, side-by-side format in the contract, depending on the country. This type of contract is common when dealing with customers, vendors or partners with subsidiaries or operations in Spanish-speaking countries, as well as Chinese, Korean, Arabic, Ukrainian, Russian and other Eastern European local languages and, to a lesser extent, Italian and German.

Which language controls?

In case of conflict between both languages, it is essential to consider which will have priority. The question is which language is the official one? Which is binding? Which will control? The agreement needs to be extremely clear. It should state that the original version is in a certain language (eg English) and if a conflict or discrepancy occurs between the languages, one of them shall prevail and take precedence over the other.

For example, a clause might have the following wording: “This agreement is in both languages, English and Spanish. In the event of any inconsistency, the English version is the original language and the Spanish version is a translation for information purposes only. Then in case of conflict, the English version will prevail and will therefore be the binding version for both parties…”

Applicable law

It is best if both the English and foreign language versions of the contract state which of these versions controls. If neither version states which one controls, then the foreign language version will normally prevail in a local court and the local law will apply if different interpretation criteria or discrepancies occur. Regardless of what the English language version states, always be aware of what the foreign language contract says as well.

Conduct a clause-by-clause review to ensure translation quality

You must ensure that you have an accurate translation of the contract.  One of the two options below can be used to perform a clause-by-clause review:

  • Proven independent law firms with international network connections and domain in multiple geographies; or
  • Official translation companies or individuals with demonstrable experience in translating legal terms and conditions.

Conclusion – keep this as a checklist

  • Clarity in communication and plain language is essential in contract drafting, especially when dealing internationally. We must pay attention to cross-cultural and language differences.
  • Evaluate if the agreement should be in English, the foreign language or both.
  • Try to avoid dual-language contracts. Insist on a “migration” of non-English speaking clients to English, but keep meetings, phone calls, conversations and follow-up procedures in the local language. If you must implement a dual-language model, state which language controls and governs.
  • Consider both choice of law and jurisdiction at the beginning of negotiations.
  • Find out if the contract provides for dispute resolution, choice of forum or jurisdiction or international arbitration. If no provision exists, assess which legal forum is best for the business. If it is a non-English-speaking forum, assume that the foreign language prevails.
  • Consider the objectives and agree on the contract language that makes sense with such a dispute resolution clause, if any.
  • Use an in-house legal counsel who understands both languages. Either get external legal advice to review the contract according to local law or hire a translation company or professional with expertise in technical-legal vocabulary.
  • Consider the time and legal fees to be spent in drafting dual language contracts.
  • Specify the currency to be applied to the contract and consider that local specific issues can impact contract performance.
  • Remember to state that the language that controls will also be the official language during the post-award contract management stage. The controlling language must be stated as the language of subsequent change requests between the parties.
  • Finally, have the contract signed by both parties. If it is a dual-language model, each party signs each version.

Now, that you have already signed the contract, in case of conflict…Good luck! Buena suerte! Boa sorte! Buona Fortuna! Bonne chance! Viel Glück! (which one controls?)