Legal Translation Services Can Help
Win the Day in International Arbitration

Legal Translators for International Arbitration

Legal translator and legal interpreter services for international arbitration are often needed these days.  The concept of arbitration has evolved in significant ways over the years. Initially, it was a response to a slow, lumbering, time-consuming, and tedious court process. As businesses, companies, and corporations began to avail themselves of the court system more frequently, the wheels of justice moved ever slower under the weight of the crushing volume of cases.

Accordingly, arbitration was the answer. It was meant to mete out justice in settling commercial disputes effectively and efficiently. It was supposed to clear away all the noise of a burdensome legal process. It was to allow parties aggrieved in a business transaction to argue a dispute before a neutral party, get a resolution, and get back to business.

In reality, arbitration has achieved some of its intended goals. Yet, complexity has crept into arbitration procedures as well, particularly with international arbitrations. Specifically, a major hurdle with regard to international arbitrations – i.e., commercial arbitrations involving parties with distinct nationalities and cultures – is the issue of language.

Language of Arbitration Proceedings and Translation

While arbitration procedures allow for maximum flexibility with regard to which (and how many) languages will be used in arbitration, problems arise when the appropriate language in arbitration is not clarified early in the process. Indeed, when an arbitration clause leaves confusion or no guidance as to the appropriate language, issues of fundamental due process come into play.

Let us discuss two examples when confusion on the appropriate language to be used in an arbitration process resulted in due process problems for an aggrieved party, and how employing professional legal translation services can help.

• The Case of the Rejected Eucalyptus Chips – Qingdao Free Trade Zone Genius International Trading Co., Ltd. v. P and S International Inc. (2009)

In this case, a United States company, P and S International, Inc., agreed to sell eucalyptus chips to a Chinese broker, Qingdao Free Trade Zone Genius International Trading Co., Ltd. The chips were to cost $150,000. The sales contract, which was less than a page long, was written in English. The contract called for all disputes to be resolved through arbitration with the Qingdao Arbitration Commission (QAC) in China.

When the product arrived in China, the Chinese broker rejected the shipment, stating that it was underweight and was too moist. The U.S. company demanded payment but did not submit a demand for arbitration.

The Chinese broker, however, did submit a petition for arbitration, stating that it was owed approximately $44,000 for shipping and customs charges. The Chinese broker also notified the U.S. company – in English – of its intention to seek arbitration.

Upon receipt of the arbitration petition, the Chinese Arbitration Commission (QAC) responded by sending a number of documents to the U.S. company, two of which were in English, and the rest in Chinese. Importantly, the official notification of the arbitration from QAC was in Chinese, not English.

When the U.S. company failed to respond to the arbitration notice, the QAC appointed an arbitrator. The arbitrator made findings and awarded the Chinese broker approximately $57,000.

The U.S. company then went to federal court in the U.S. and sued to deny enforcement of the QAC’s arbitral award. The U.S. company’s argument was that it was not notified of the arbitration in English, and therefore was not afforded due process. The U.S. federal court agreed, stating that the QAC did not provide notice that was “reasonably calculated, under all the circumstances, to apprise them of the pendency of the arbitration and afford them an opportunity to be heard.”

• Co-Branding No More – CEEG (Shanghai) Solar Science & Technology Co., Ltd. v. LUMOS LLC, n/k/a/ LUMOS SOLAR LLC (2016)

In this recent case, the parties CEEG, a Chinese seller of solar products; and Lumos, a U.S. buyer of solar products, entered into a “co-branding” agreement and a sales agreement.

The sales agreement, written in English, provided for arbitration of disputes but did not designate a language to be used at arbitration. The co-branding agreement, which was considered an “umbrella agreement,” however, included a clause specifying English as the relevant language for the parties. Notably, all of the communications between the parties were in English.

When the parties hit a snag with a defective goods claim, the Chinese seller instituted an arbitration proceeding under the sales agreement, not the co-branding agreement. The notice of arbitration was in Chinese. The U.S. buyer, claiming that it needed more time to translate the Chinese arbitration documents and hire Chinese counsel missed the 15-day deadline imposed by the Chinese arbitration panel.

The Chinese panel then appointed an arbitrator, and rejected the U.S. buyer’s objection to the arbitrator. Ultimately, the arbitration panel issued an award in favor of the Chinese seller, charging the U.S. buyer over $1.5 million in outstanding payments, interest, attorneys fees, and costs.

When the Chinese seller moved in U.S. federal court in Colorado to confirm the arbitration award, the court denied the request. The U.S. federal court found that the arbitration documents sent to the U.S. buyer in Chinese were not reasonably calculated to inform the buyer of the arbitration proceedings. The court also found that the U.S. buyer was prejudiced because it was deprived of its right to participate in the selection of the arbitrator and the arbitration proceedings. The 10th Circuit Court of Appeals affirmed the lower federal court’s decision.

Language Clauses Are Important, and So Are Legal Translators

The cases above highlight two very important points. First, U.S. courts will rely on concepts of fundamental due process when it comes to how arbitrations are handled internationally. Even if the arbitration panel is in China, arbitration awards will not be enforced in the U.S. unless U.S. companies are permitted the due process to effectively participate in the arbitration process.

Second, U.S. companies that have any contractual relationships with foreign countries should have a professional legal translation service to contact if/when an international arbitration dispute arises.

As they say, “an ounce of prevention is worth a pound of cure.” Rather than fight it out in federal court after an arbitration decision in China, or another country, has been made against you; the more proactive, and cost effective, solution is to work with a professional legal translation service.

All Language Alliance, Inc. is the type of service you need. We can be available if you are hit with an arbitration demand in a different language, and have a short time frame in which to respond.  Learn more today about legal translation services from Mandarin Chinese, Japanese, Portuguese, Korean, German, French to English by filling out the “Legal Translation Now!” form on your right.

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