The only reliable way we've found for setting the default character encoding for Scala is to set $JAVA_OPTS before running your application:

$ JAVA_OPTS="-Dfile.encoding=utf8" scala
Welcome to Scala version 2.7.5.final [...]
Type in expressions to have them evaluated.
Type :help for more information.

scala> val x = "garçon"                                     
x: java.lang.String = garçon

Just trying to set scala -Dfile.encoding=utf8 doesn't seem to do it. Of course, you may not need this if your OS defaults to a sensible character encoding. I'm lumbered with something called "MacRoman"...

You'll also want to make sure your terminal is set to UTF-8 encoding, which on the Mac is Terminal -> Preferences -> Settings -> Advanced -> International.