The Indonesian Court of Appeal (High Court in Appellate Decision, No. 48\/Pdt\/2014\/PT.DK) held that contracts are valid only if at least one contractual version is available in Indonesian (Bahasa), regardless of whether the contract was concluded with a foreign company.<\/p>\n
Since 9 July 2009, Law No. 24 of 2009 has been in force in Indonesia and has caused considerable attention in international business transactions. Article 30 of the law essentially provides as follows:
\n\u201cThe Indonesian language must be used in every contract with an Indonesian company [\u2026] or with a person of Indonesian nationality. Every contract with a foreign contracting party should also be drafted in that party\u2019s national language or in English. Indonesian does not have to be expressly agreed as the contractual language; however, an Indonesian version is also required if the contract concerns an Indonesian party.\u201d
\nThe Jakarta High Court had to consider this provision in the appellate proceedings and reached the following conclusion on 7 May 2014:<\/p>\n
A contract between a foreign company and an Indonesian company is invalid whenever the contractual text has been drafted only in English and not also in Indonesian.<\/p>\n
Background of the case:
\nNINE AM Ltd. (claimant) entered into a loan agreement with Bangun Karya Pratama Lestari (defendant), an Indonesian company, in the amount of USD 4,422,000. Indonesian law was chosen as the governing law. After the defendant failed to pay the outstanding loan amount of USD 115,540, the claimant brought an action before the competent District Court and claimed the outstanding amount together with the resulting interest. On 20 June 2013, the District Court ordered the defendant to pay the claimant USD 115,540. The claim for interest was dismissed.<\/p>\n
The judgment was based on the reasoning that the entire loan agreement was invalid due to the mandatory formal requirement under Article 30 of Law No. 24 of 2009. Consequently, the claimant was to be placed only in the position it would have been in had the loan agreement never been concluded. The High Court in the appellate decision agreed with this reasoning. It remains to be seen whether the parties will seek an appeal to the Supreme Court.<\/p>\n
Practical note: Entrepreneurs should take this investor-unfriendly case law as a reason to include arbitration clauses in their contracts or to restrict the choice of law to jurisdictions outside Indonesia. For contracts with Indonesian parties, however, the following is recommended:
\n1) Contracts should also be concluded at least in the Indonesian language (Bahasa).
\n2) Existing contracts that were concluded only in one language \u2014 and not in Bahasa \u2014 should subsequently be supplemented by an Indonesian version.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Indonesian Court of Appeal (High Court in Appellate Decision, No. 48\/Pdt\/2014\/PT.DK) held that contracts are valid only if at least one contractual version is available in Indonesian (Bahasa), regardless of whether the contract was concluded with a foreign company. Since 9 July 2009, Law No. 24 of 2009 has been in force in Indonesia […]<\/p>\n","protected":false},"author":29,"featured_media":55708,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[139],"tags":[],"class_list":["post-55707","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-en"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\t