Do you remember “Lost in Translation”, the movie directed by Sophia Coppola, starring Bill Murray and Scarlet Johansson? Murray plays the role of an American actor who is in Japan to shoot a liquor commercial, while Scarlet Johansson … Well, sorry, Johansson is off topic here; let’s stay focused on Murray. While in Tokyo for the shooting, he is surprised by many local features and cultural differences, just to name one, the shower in his hotel room, which he discovers being “leetle” shorter than he is accustomed to. All this triggers quite humorous scenes. To me, however, the funniest is the shooting of the commercial. Now, just for the few of you who haven’t seen the movie, let’s visualize the Japanese director trying to direct Murray to move in a certain fashion for the camera. The director does that in a long, articulated and, arguably, emotional harangue. Murray’s interpreter translates it into “move your head” and “more intensity.” We do not really know why, whether for lack of translational skills, sloppiness or because of an objective impossibility to convey the full fledge of the director’s Japanese words into English. We know the result, however: following the translator’s words, Murray moves his head and puts all the intensity that he can but … guess! The director is not happy. Obviously something that he said was … lost in translation!
Similar situations happen very frequently to clients and lawyers involved in international transactions and litigation, except that it is not so funny as in Murray’s case.
Indeed, we call “lost in translation issues” those hidden legal, cultural, linguistic differences, and false similarities that complicate – often completely unbeknown to the parties and the lawyers involved — international transactions and litigation because of language and legal system barriers (I include cultural differences in the latter).
Language barriers happen either when the parties (or their lawyers) do not speak a common language or when a translation is absolutely impossible (think of the English word “trust,” which does not have a translation in many languages). Language barriers trigger the least headaches because they are quite easy to spot and solve. Legal system barriers are by far the most dangerous. Legal system barriers happen when, even if the parties generally understand each other and a translation of a word is theoretically possible, a legal concept involved in the transaction varies so much from one system to the other, that any translation becomes meaningless (consider, for example, the different meaning of “ownership” in common law and civil law systems).
To understand how the “lost in translation” problem works just imagine this scenario: negotiation for the purchase of Italian real estate between an American buyer (“Mr. Byr”) and an Italian developer (“Ms. Cellar.”). Ms. Cellar and her lawyer have flown to New York to negotiate the deal. They agree on a purchase price of EUR 12m to be paid in 4 equal installments, one at the signing, one at the closing, one six months from the closing, and a final payment twelve months from the closing. Ms. Cellar’s Italian lawyer says: “Il rogito si fara’in Italia con atto pubblico notarile.” Mr. Byr turns towards his American lawyer and asks: “What did he say?” The lawyer, who speaks fluent Italian because he spent his junior year of college studying Renaissance art in Florence, answers: “Well, he said that the closing will be performed in front of an Italian notary with a notarized instrument” and then: “I know what concerns you, Mr. Byr: you cannot travel to Italy to close the deal. Well, no worries, we will simply grant a proxy to someone to go on your behalf”. Reassured by his lawyer, Mr. Byr, nods. Ms. Cellar and her lawyer are also satisfied. Parties shake hands and reserve a table at Ms. Cellar’s favorite restaurant in NYC, where she always goes every time she is in town, without even glimpsing that they have an issue. Which is the issue?
Well, the issue is the inability of US notaries to issue public instruments, which is “atto pubblico notarile”: it will be impossible for Mr. Byr to grant a proxy with the same formality of the future notary deed, as he should according to Italian law.
As a little bit of background, consider that “civil law” notaries, as notaries are in Italy and in 87 other countries, are very different from US notaries (a.k.a. “public notaries” or “notaries public”). In common law countries public notaries are not legal professionals. They are public officials delegated by the state certain authentication powers for a limited term (“commission”). They administer oaths and affirmations, receive statutory declarations, witness and authenticate documents, take acknowledgments of deeds, and do other activities depending on the jurisdiction but they are prohibited from practicing law (unless they are admitted as a lawyer). In civil law countries notaries are public officials but they are also law-trained legal professionals and central figure of the law: they generally must be present and authenticate property transfers, formation and incorporation of companies, bank loans, donations, wills, and many commercial transactions.
While civil law notaries can issue a “atto pubblico”, i.e. a public instrument (a.k.a. “authentic instrument”), US notaries cannot (with limited exceptions for Louisiana, Florida and Alabama). A public instrument is a document that is drafted entirely by the notary and that has a high probative value of the authorship of the document, of the parties’ declarations, and of the other facts that notaries certify as happening in front of them. A public instrument is – from the perspective of enforcement — very similar to a definitive judgment because in case of breach, a foreclosure procedure can be started without waiting for a court decision on the breach. When Mr. Byr would try to obtain a proxy with this formality in the US, he will not be able to obtain one.
What went “lost in translation” in the Byr/Cellar translation? The different role and characters of notaries in the two systems.
Had he know that US notaries cannot issue public instruments, the Italian lawyer for Ms. Cellar would probably not have suggested to proceed to the sale through an authentic instrument but he could not spot the “proxy issue”. On the other side, the American lawyer did not raise the issue because he did not know that the Italian notary would require a proxy in the form of a public instrument and maybe he did not know what a public instrument is. This is an example of a typical “lost in translation issue,” which can generate costs, delay, and client frustration. Indeed, can you imagine the parties’ dissatisfaction when, long after an agreement on price had been reached, financing to buy the property has been obtained, Mr. Byr’s proxy, duly apostilled and translated, is rejected by the Italian notary for lack of formality?
So, was the transaction between Mr. Byr and Ms. Cellar totally impossible if Mr. Byr cannot travel to Italy? Obviously not. The lawyer’s knowledge of both the Italian and American legal systems would have allowed the negotiation of a somewhat different but probably equally satisfactory transaction.
What should the parties or their lawyers have known? (1) They should have known that US notaries cannot issue authentic instruments; (2) They should have known that authentic instruments are not the only documents by which real estate transactions can be closed in Italy (they can be close also by “authenticated instruments” discussed below); (3) They should have known the different consequences of closing through an authentic instrument or an authenticated instrument in point of protection from a breach.
Had the parties to our transaction been properly advised, they probably would have agreed to proceed through an authenticated instrument because the proxy could have been obtained with that formality in the US. An authenticated instrument is a written private document that is signed by parties in front of a notary, who certifies their identities after obtaining proper documentation. An authenticated instrument, like a public instrument, has a high probative value but only as to the identity of the signors. It is not similar to a judgment when it comes to foreclosure, however: in case of breach, the nonbreaching party must sue the breaching party to have a judge to declare the breach before starting foreclosure, which remarkably increases the time and costs for the nonbreaching party. This is not without a solution, however. Knowing that authenticated instruments offer less protection than authentic instruments, Ms. Cellar could have requested, for example, a bank guaranty (or other safeguards) to “cover” the possibility that Mr. Byr might not pay the two installments after the transfer of property, or the transaction might have been negotiated with another payment scheme. There are generally many alternative schemes once the parties are aware of a “lost in translation” issue.
The above is not the only “lost in translation” issue concerning notaries, however. While US notaries’ inability to issue authentic instruments is a big issue for Americans involved in “outbound transactions” (i.e. when a party must supply a document from the US to be used in a civil law country), like the one of our example, in “inbound transactions” (i.e. when a party must supply a document from a civil law country to be used in the US), the main issue is the different qualifications of notaries in the two systems.
Let’s take the previous example just reversing it. Let’s say that Mr. Byr is Italian and Ms. Cellar is American and that the real estate is in the US. Mr. Byr wants to buy Ms Cellar’s interests in the real estate, which is a contingent remainder interest (i.e. an interest that first year law students learn for the Property exam and quickly forget). The parties agree to close the deal in the office of the closing lawyer, as required by the local law (indeed, in many US American jurisdictions, a lawyer must close the real estate transaction) and that the instrument will be notarized by this lawyer, who is also a notary public. Mr. Byr cannot travel to the US, so the parties agree for him to issue a proxy. Is this transaction going to be any simpler? Not so much. Why? Well, it is far from granted that an Italian notary will agree to issue an authenticated proxy for Mr. Byr.
What is the “lost in translation” issue in this example? While a civil law authenticated instrument is the same as a notarized document in the US, the participation of civil law notaries is much more pervasive. First, it is unlikely that an Italian notary will be willing to authenticate the signature of Mr. Byr on a document written in a foreign language. The proxy will likely be issued in Italian, which triggers problems of translating a concept that Italian law does not know (contingent remainder interest.) Second, civil law notaries have an obligation to advise the parties. Indeed, because civil law notaries are also legal professionals, they have the mission to give legal advice. Civil law notaries, therefore, do not simply authenticate the signature on a private instrument, they read the text, explain the legal consequences, and give impartial advise. In order for the notary to give legal advise, he will have to be privy, at least in general terms, of the nature of the underlying transaction. Indeed, the proxy will have to specify the powers granted to the attorney-in-fact. It is not infrequent that civil law notaries refuse to authenticate proxies when they do not understand the underlying transaction. Discovering the difficulty when negotiations are already advanced or worse, when the parties have already agreed on everything, except that … “oh, yes … that little thing called “proxy” from Italy, which shouldn’t be a problem, right?”; they try to obtain it and … here the “lost in translation” issue pops up. Not funny. What is the solution? Once again knowledge of the two systems would allow a lawyer to spot the issue at the inception of the negotiation. In most cases, advance planning and flexibility allow parties to deal with issues like the one presented above. For example, Mr. Byr – with time on his side — might find a notary who allows proxies to be granted in a foreign language or bilangual (it has happened to me) and who relies on a sworn opinion by an independent American lawyer or better legal expert, duly apostilled/legalized.
The two situations above described are indeed quite simple. Transactions can obviously be much more complicated than that. The more complex the transaction, the more “lost in translations issues” parties might have. Indeed, the difference between civil law notaries and public law notaries are only one of the hundred of lost in translation issues that parties might face.
Similar “lost in translation” issues ensure in litigation settings.
In transactions or litigation involving two fundamentally different legal systems, as Common law and Civil law are, parties need legal professionals with knowledge of the two systems, who can help spot issues, suggest a discussion of those issues, and help find alternative solutions.
* Founding Member of Crystal & Giannoni-Crystal, LLC., Member of the New York Bar, Avvocato, Foreign Legal Consultant South Carolina (Italy, not a member of SC Bar). Contacts: fgiannoni-crystal@cgcfirm.com.
