The Negotiation and Drafting of International Contracts Course of Mr. Robert Simpson
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iii. LanguageImportance of the choice of the language of the contract. Note: French employment agreements must be in French. If a contract is drafted in two or more versions, which governs? The contract usually says which governs, that both versions have equal value or that one governs, but the other may be used if necessary for clarification. Heinz example of having English version on one side of the page and the French on the other. The choice of language can be relevant in an arbitration. For example, Article 16 of the ICC Arbitration Rules provides: In the absence of an agreement by the parties, the Arbitral Tribunal shall determine the language or languages of the arbitration, due regard being given to all relevant circumstances, including the language of the contract. iv. Title of contractNeed to avoid an erroneous or insufficient titles. In the Noga vs. the Russian Federation arbitration, there was extensive debate with respect to a document entitled “Loan Agreement” which was, in fact, a complex barter agreement and not a loan agreement. The misnomer created ambiguities which were exploited by the Russian Federation in the arbitration. As concerns titles, it is often provided that titles and subtitles are used for convenience purposes only and shall not affect the meaning or interpretation of the contract. v. The partiesIt is necessary to know if the parties have the capacity to consent validly to the contract. As concerns individuals, the question of capacity is determined by the law of the country of which he is a citizen. The validity of consent is determined by the law applicable to the contract. As concerns, legal entities, questions as to the power and authority to contract depend on the lex societatis. In the US, this means the law of the place of incorporation. In France, it is the law of the siege réel. There can also be a question as to the recognition of a legal entity in different countries. See, for example, the Hague Conventions concerning the recognition of foreign companies and foundations (1956),trusts (1985). There are also provisions in the European Union treaties concerning the mutual recognition of companies and legal entities. One must also verify the capacity of individuals to act on behalf of a legal entity. In France, the verification is simplified if the person signing is the President as the president has full power and authority pursuant to law. In the United States, you can have a President, a Chief Executive Officer, a Chief Operations Officer, a Chairman of the Board, etc. The powers of each depend on the company’s articles of incorporation and by-laws (necessity of procuring an “incumbency certificate”). It is also necessary to verify the exact identities of the parties. Beware of companies with parents, subsidiaries or sister companies bearing the same name. If a party is a government or a governmental entity or agency, verification can sometimes be difficult. (Example of an agreement by the Minister of Finance of Liberia being later held not to bind the Government.) Sometimes it is even necessary to verify if appropriate administrative measures have been taken or if the project has been properly included in a government budget providing authorization and funds for the project in question. (Examples of Letco and Noga.) Watch out for exorbitant clauses inserted by a government. Sometimes special laws or even treaties of establishment) are necessary (examples of KECO, IMM, Noga and EuroDisneyland). Finally, there is the sensitive legal and political question of the immunity of a sovereign state from jurisdiction and/or execution. Of court judgments or arbitration awards. Distinction between acts state acts and commercial activities. vi. AnnexesAnnexes can be used for many reasons - for secondary or technical matters, for accompanying agreements, for political reasons, etc. Be careful with side letters that set forth some special provision, exception, etc. Side letters can be valid under civil law, since one looks to the overall intent of the parties. However, Article 321 of the French Civil Code provides that “les contre-lettres ne peuvent avoir leur effet qu’entre les parties contractantes; elle n’ont point d’effet contre les tiers.” Also Article 1840 of the French Code général des impôts provides as null and void: toute contre-lettre ayant pour objet une augmentation du prix stipulé dans le traité de cession d’un office ministériel et toute convention ayant but de dissimuler partie du prix d’une vente d’immeubles ou d’une cession d’un fonds de commerce ou de clientèle ou de cession d’un droit à un bail ou du bénéfice d’une promesse de bail portant sur tout ou partie d’un immeuble et toute ou partie de la soulte d’un échange ou d’un partage comprenant des biens immeubles, un fonds de commerce ou une clientèle. It is sometimes more difficult to give effect to side letters in American practice especially if the contract contains an “entire agreement” clause: This Agreement and the annexes hereto and their respective annexes constitute the entire agreement of the parties and supersede any and all prior agreements of the parties with respect to the subject matter thereof. No amendments, alterations or waivers of any of the terms of this Agreement shall be binding unless the same shall be in writing and duly executed by both parties. Hierarchy of terms Special terms generally prevail over general terms. Specific contracts prevail over framework agreements (contrats cadres). Standard international contract provisions Set forth below is a description of typical standard provisions (sometimes referred to as “boilerplate”) that appear in most all “international” contracts. 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