Botched Mongolian Translation Contributes to Invalidation of Forum Selection Clause
We’ve blogged before about the importance of accurate legal translations to the enforcement of international contracts. Contracts use precise language to signal the parties’ agreement that particular matters should be handled in a particular way. But sloppy translations of contract documents can cast doubt on whether the parties actually reached agreement. As a result, courts may refuse to enforce contract provisions with translation discrepancies.
The forum selection clause is a type of contract clause in which meticulous legal translation is particularly important. As the case below demonstrates, failure to translate accurately the forum selection clause of an international contract can cause U.S. courts to refuse to hear lawsuits based on the contract.
Lawsuit to Enforce Mongolian Contract Brought in Colorado Court
In Wagner International, LLC v. Mandal Alt Company, Wagner International, an American company based in Colorado, sued a Mongolian company, Mandal Alt, to enforce a contract for a loan. Wagner loaned Mandal the money so the company could purchase two large tractors from Wagner’s affiliate based in Mongolia, Wagner Asian Equipment, to work in Mandal’s Mongolian gold mines. Mandal defaulted on the loan payments and eventually returned the tractors to Wagner Asian, but Wagner Asian failed to recoup the full loan amount through its resale of the tractors. Wagner International then sued Mandal in federal district court in Colorado to recover the difference.
Mandal moved to dismiss Wagner’s suit, claiming in part that the Colorado court’s lacked personal jurisdiction over Mandal. Wagner countered that Mandal consented to personal jurisdiction in Colorado by its agreement to the loan contract’s forum selection clause, which specified that lawsuits arising from the contract would be brought in Colorado.
Forum Selection Clauses Specify Where to Bring Contract Suits
The law of contracts generally permits parties to shape their business relationship however they see fit, including how future disputes about the contract will be resolved. For example, parties can resolve ambiguity about where lawsuits arising from the contract may be brought by specifying a forum within the contract. Such an agreement is memorialized within the contract as a forum selection clause. Typically, such clauses are sufficient to grant courts in the designated forum personal jurisdiction over the contract parties.
In the 1972 case of M/S Bremen v. Zapata Off-Shore Oil Company, the U.S. Supreme Court ruled that forum selection clauses in international contracts are presumptively valid. In 1992, the Court clarified in Carnival Cruise Lines v. Shute that the fundamental fairness of forum selection clauses must be evaluated in the business context in which the contract appears. The Shute Court emphasized that forums that are extremely remote to one or both of the parties are especially suspicious, since designating a remote forum might be a means of discouraging parties from bringing legitimate lawsuits based on the contract.
Legal Translation Discrepancies Contribute to Clause’s Fundamental Unfairness
In applying the principles of M/S Bremen and Shute to the forum selection clause in Wagner and Mandal’s loan contract, the court began by noting Colorado’s extreme remoteness from the parties and events governed by the contract—all of which were based in Mongolia. A Mongolian mining company, Mandal, took out a loan to buy tractors from another Mongolian company, Wagner Asian, to work in Mandal’s Mongolian gold mines. Indeed, the contract’s only connection to Colorado was the state’s location as the headquarters of Wagner International. Even so, the contract’s formation and execution had been carried out for Wagner International entirely by Wagner Asian. As a result, most of the individuals involved in the contract dispute lived in Mongolia and spoke Mongolian. Under these circumstances, the court concluded that the forum selection clause unfairly benefited Wagner by allowing it to drag Mandal into court thousands of miles from the actual site of the dispute.
The court found further support for its conclusion of unfairness in the fact that the Mongolian translation of the contract appeared to differ significantly from the English version. While neither party provided a direct English translation of the Mongolian contract, the court was alarmed that the numbering of the Mongolian contract differed from that of the signed English version. Moreover, an entire section of the English contract governing use of collateral was missing from the Mongolian contract. Finally, the Mongolian version of the forum selection clause contained a reference to the United Nations Commission on Trade Law (UNCITRAL) that appeared nowhere in the English version. Although the court conceded its inability to compare the English and the Mongolian contract versions thoroughly without literacy in Mongolian, these discrepancies were sufficient to indicate that the two versions of the contract were different enough to prevent Mandal from fully understanding the forum selection clause.
Based on Colorado’s distance from Mongolia and the differences between the Mongolian and English versions of the contract, the court concluded that the forum selection clause was fundamentally unfair to Mandal and refused to enforce the clause. As a result, the court concluded that it lacked personal jurisdiction over Mandal and dismissed Wagner’s lawsuit.
Prevent Contract Enforcement Issues by Hiring an Expert Legal Translator
Providing accurate translations of international contracts to all non-English speaking parties is one of the surest ways to avoid enforcement issues down the line. And the best way to ensure accurate legal translations is to hire an experienced legal translator to translate your international contract.
Wagner International, LLC v. Mandal Alt Company, Limited, Case No. Civ-A-CV195JLK, was decided by the U.S. District Court for the District of Colorado on July 8, 2005.
Contact All Language Alliance, Inc. to retain a competent Mongolian deposition interpreter for in-person deposition, or for a Zoom deposition, and to request certified translation services for enforcement of contracts written in Mongolian, Spanish, Italian, Romanian, French, Chinese, Russian, Portuguese, German, Amharic, and other foreign languages.
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