Irina Mikhnova and Mikhail Basisty, corporate law specialists in Fieldfisher's Russia and CIS group, consider the application of US and English law terms in Russian language contracts.
When drawing up contracts, parties sometimes include obligations – fulfilment of which depends upon third parties, external circumstances, or other obligations that might not be performed at all.
In such cases, the parties (or any parties involved in the deal) usually agree to apply all efforts to fulfil the corresponding obligations, or to assist with the occurrence of certain events.
This intention of the parties is often expressed as "best efforts". When using this term, it is important to understand its legal meaning within the framework of English law and what it implies in practical terms.
In fact, "best efforts" is a term of US law, and as of today, there are not enough court decisions to formulate a position with regard to this term under English law.
For this reason, if a contract is concluded under English law and contains the expression "best efforts", in the event of a dispute, a judge will review the contract provisions as well as the actual elements of the dispute to determine what the parties meant by this term.
"Best efforts" will most likely be interpreted by the courts by analogy with the English law term "best endeavours". Therefore, when drawing up an English law contract, it is recommended to use the wording "best endeavours", in relation to which there is a relevant case law base.
Russian language contracts
From the Russian language point of view, there is no difference between "best efforts" and "best endeavours" – this concept is commonly translated as "все возможные усилия" ("all possible efforts").
For this reason, often when the respective obligations of the parties are discussed in Russian (or another) language, they are expressed in a contract as "best efforts".
As a result, legal uncertainty arises, as "best efforts" and "best endeavours" are terms of different jurisdictions.
In each particular situation, the interpretation of "best endeavours" will depend on the context of a contract and transaction.
However, in general terms, this term means the following: the party will be obliged to take all the actions that it can take and which can lead to the desired result irrespective of its own interests (subject to the limitations discussed below).
This implies all possible actions that would be taken by a reasonable person who wishes to achieve a similar result in such circumstances. In other words, the party making the commitment to "best endeavours" should take appropriate actions, even if they are, to some extent, detrimental to its own interests.
In practice, this means that a person undertakes to take any commercially feasible actions (taking into account costs and the level of complexity), incur costs or losses (including possible legal proceedings) and may need to attract resources from another business to fulfil the obligation.
Nevertheless, the party is not obliged to go beyond the reasonable, that is, for example, take actions that will lead to its bankruptcy, or which are obviously doomed to fail. Thus, if efforts are made to, for example, obtain any approval of the transaction, and these efforts have not been successful, the party may need to continue negotiations or appeal the decision in order to fulfil its obligations.
Another term used in English law as an alternative to "best endeavours" is "reasonable endeavours", which implies a less significant involvement of the party in terms of time and money to achieve the goal.
The main difference lies in the fact that the obligated party should not perform actions that would harm its own interests. In practice, this obligation means that the party undertakes any commercially viable actions to the extent that they do not have negative consequences for the commercial interests of that party.
The party may also consider the cost of implementing such an action and assess the chances of success before taking any action. This also means that there could only be one course of activities, and it is not required that the party takes all possible reasonable actions.
There are other possible variations, such as "utmost endeavours", "all reasonable endeavours", "commercially reasonable endeavours" (or "reasonable commercial endeavours"), which can also be found in contracts.
If you have any questions or concerns on this topic, Fieldfisher's corporate law specialists within out Russia and CIS group we will be glad to provide practical advice on the use of the above terms in English law contracts. Should you need a more detailed consultation on this or any other question, please do not hesitate to contact us.
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