Duplicati never interprets such variables. If done at all, it’s done by whatever it runs, e.g. cmd.exe.
Running a test, using Windows 10 Settings to change Regional format in Region settings, suggests that it’s per-user, as the user doing the change changed, and another user on PC didn’t.
Because you are running Duplicati as the SYSTEM user, I wonder what date output it is giving you?
You can test that with an echo command to a known file, e.g. echo %DATE% > <some filename>
Possibly the SYSTEM account has a standard format, e.g. English (United States) for safety.
Unexpected bugs can creep in when things vary, e.g. my format throws spaces and slashes out…
If that means a Windows service, you can change it to run as you instead (if that’s sufficient, and sometimes it isn’t) Service for /localuser has thoughts on what works, and what might not work…
But until you find out what your %DATE% is saying when run by Duplicati, this is all rather a guess.
Does a date really need to be there anyway? What’s your cleanup plan for old ones sitting there?
Theoretically, this file only needs to exist until Duplicati has backed it up, then it can be deleted…