Indonesia's so-called Language Law of 2009 requires the use
of Indonesian language in all agreements to which Indonesian
companies, Indonesian citizens or State/Government institutions are
party. While not specified in the law, it is widely recognised that
the Indonesian language requirement must be followed, even where
the governing law is not Indonesian law. This applies to all
Indonesian companies, even where the shares are 100%
This has led to agreements involving Indonesian parties being
executed in Indonesian-English (dual-language) format.
The law does not specify the consequences of failure to execute
agreements in the Indonesian language. As is typical with
Indonesian laws, further details are to be contained in
implementing regulations. To date, those implementing regulations
have not been issued.
The West Jakarta District Court recently held that a loan
agreement executed in English language only was invalid. The basic
rationale for the decision was that an English-only agreement was
in breach of the Language Law and, therefore, did not have a
"legal cause" under the Civil Code.
Indonesia does not follow a system of judicial precedent and,
therefore, the decision is not binding on other courts. The losing
party has filed an appeal to the High Court. There is a further
right of appeal from the High Court to the Supreme Court.
Accordingly, it may be several years before Indonesia's
top court confirms its position on this issue.
While not a precedent, the West Jakarta District Court decision
may indicate the direction which Indonesian courts will follow in
interpretation of the Language Law. We continue to advise clients
to execute agreements in bilingual format.
To the extent that this is not possible given time constraints,
the agreement should include a provision which states that an
Indonesian translation will be prepared and executed within a
certain time period. We do not recommend that the time period be
left open-ended, as this is really ultimately an "agreement to
agree", which relies on the cooperation of the parties.
Given that an Indonesian translation is most likely to be
required for the purposes of court enforcement in a dispute, one
party could merely refuse to execute an Indonesian version, with
the potential results that a court would decide along similar lines
to the West Jakarta District Court.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).