Short answer is it should be able to do this correctly.  I haven't
investigated why it's occurring, but it might be an ordering issue in
PAM (i.e. you need to have the pam_environment run after the ecryptfs
module as well as before it)

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https://bugs.launchpad.net/bugs/952185

Title:
  ~/.pam_environment not parsed when HOME is encrypted

Status in Light Display Manager:
  Triaged
Status in “lightdm” package in Ubuntu:
  Triaged
Status in “lightdm” source package in Precise:
  Triaged

Bug description:
  I have noticed this with LightDM 1.1.6 - 1.1.8. Is HOME 'unlocked' too
  late?

  The result is that the session environment contains the system wide
  locale settings, while the user's locale settings are ignored.

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