Mandatory use of Indonesian language (‘Bahasa Indonesia’) in Contracts
The Indonesian Government issued Law No. 24 of 2009 concerning the National Flag and Language, State Symbols and the National Anthem (Undang-Undang Bendera, Bahasa, dan Lambang Negara, serta Lagu Kebangsaan) on 9 July 2009 (the “Law”), in which Article 31 stipulates that the Indonesian language must be used in any memorandums of understanding or contracts involving state institutions, government agencies of the Republic of Indonesia, Indonesian private institutions, or individual Indonesian citizens. The Law further provides that if any such contracts involve non-Indonesian parties, the contracts may also be written in the national language of the non-Indonesian party and/or in the English language, and that “all of such texts are equally authentic”. The Law does not, however, stipulate any sanctions for any violations of such provision. Since its enactment, Article 31 has changed the way Indonesian transactions are documented.
“Good to have”
Prior to the ruling of the West Jakarta District Court in June 2013 (please see explanation below), views on the requirements to use the Indonesian language varies.
As accurate legal translation is always a very difficult task and the process would add to transaction costs, many would argue that it is good to have an Indonesian language translation, but it is deemed as merely a supplementary formal requirement, of which the failure to meet such a requirement should not affect the validity of the contract.
Case of PT Bangun Karya Pratama Lestari v Nine AM Ltd
June 2013, the Indonesian language requirement is considered braced by the ruling of the West Jakarta District Court, as the court annulled a loan agreement between PT Bangun Karya Pratama Lestari (as an Indonesian borrower) and Nine AM (a non-Indonesian lender) on the grounds that an Indonesian-language version of the agreement had not been executed. In the construction of the ruling, the Court deemed that the loan agreement was in breach of Article 31 of the Law, and that, additionally, it also failed to meet the entire requirements of a valid agreement that are set forth under Article 1320 of the Indonesian Civil Code. On this basis, the Court therefore rendered the loan agreement and any agreement entered into pursuant to this ruling as null and void.
The District Court decision was affirmed on May 7, 2014, by the Jakarta High Court, through Appellate Decision No. 48/Pdt/2014/PT.DKI. As of the writing of this article, we have not been made aware of any motions of appeal to the Supreme Court by the lender.
A risk-averse party will require that any contract with an Indonesian party be drafted in the Indonesian language if it is to be upheld in an Indonesian Court.
Indonesian Notarial Deed in English
The amendment to Law No. 30 of 2004 on Notary (Law No.2 of 2014) was issued to, among others, enable a notarial deed to be executed in a foreign language, provided that the foreign language must then be translated and elucidated into the Indonesian language by the notary or a sworn translator. If the deed is to be translated by a sworn translator, the sworn translator must also sign the minutes of the notarial deed.
The information contained in this article is for general use only and should not be construed as legal advice.
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