The obligation to use Indonesian Language in transnational contracts has got a public attention after the arising of the case in a cassation level between Nine AM Ltd as the petitioner on appeal vs PT Bangun Karya Pratama as the respondent of appeal.  The case has been decided by the Supreme Court under the Decision number 601 K/PDT/2015 dated 31st of August 2015.  This decision also gives meaning that the Supreme Court affirms the decision by the DKI Jakarta High Court Number: 48/PDT/2014/PT.DKI dated 7th of May 2014, whereas the three of the court decision stating that the Contract made between Nine AM Ltd and PT Bangun Karya Pratama is legally null and void, due to the violation of the obligations to use the Indonesian Language in any agreement which regulated under Article 31 Paragraph 1 Law Number 24 of 2009 concerning National Flag, Language, Emblem and Anthem (Language Law), such contract only made in English language, without the Indonesian language versionbeing made.

Under the Decision of Supreme Court Number 601 K/PDT/2015 dated 31st of August 2015 we can see that the Supreme Court is strengthening the existence of Indonesian Language in a contract made between any foreign party with Indonesian party, which means this Decision also confirming the obligations to use Indonesian language in an agreement, and any agreement that being made in a foreign language from the beginning must also be written in Indonesian language.

This Decision of Supreme Court Number 601 K/PDT/2015 dated 31st of August 2015 also turning down the Letter issued by the Ministry of Law and Human Rights of the Republic of Indonesia Number M.Hh.Um.01.01-35 Year 2009 regarding Clarification for Implication and Implementation of Law Number 24 of 2009, which specifies that:

  1. A signing of a private commercial agreement in English without accompanied by Indonesian language version will not violate the requirements as mentioned in Law Number 24/2009, therefore that agreement shall be valid and not legally null and void or non-cancellable;
  2. The implementation of obligation as mentioned Article 31 of the Law shall be pending to the issuance of Presidential Regulation;
  3. The obligation under the Law is not retroactive so that the agreements that were being made before the promulgation of such Presidential Regulations are not required to be adjusted or adjusting the usage of Indonesian language as determined in such Presidential Regulation;
  4. In relation to the use of language, basically the parties is free to state which language they will use in the contract and if the Presidential Regulations later determined that the parties must use dual language, then the parties will be bound by such obligation to use dual language, however it does not prevent the parties to choose which language to be used if there is any difference in the interpretation of any words or phrases in such agreement.

The turning down of the letter by the judges is due to none of the authority that explicitly stated that the Ministry of Law and Human Rights can interpret the provisions of Law, so that the Letter issued by the Ministry of Law and Human Rights may only be used as reference by the concerned party and it is not binding to the judges in making decision on the dispute of the obligation to use the Indonesian language.

Thus, based on the Decision of Supreme Court Number 601 K/PDT/2015 dated 31st of August 2015, we can see that the usage of Indonesian language in any contract made by the foreign party and Indonesian party that is using Indonesian law as its choice of law is obligatory.

Therefore, until now the Indonesian Language must be used in a memorandum of understanding or agreement involving State institution, agencies of the Government of the Republic of Indonesia, Indonesian private institutions or individuals of Indonesian nationals, and if such memorandum of understanding or agreement is involving foreign parties then it also be written in the national language of the foreign parties or in English language.

To ensure your business operation from the legal perspective, it is advised for you to find capable and trusted lawyers or legal consultants for advice and assistance in ensuring your legal compliance with prevailing laws and regulations and also still focus on reaching your company revenue target.

SMART Consulting is an Indonesian Corporate Legal Services firm. SMART has assisted Clients of multinational companies who run business in Indonesia, both domestic or foreign entities to review the contract or draft a new one. Consisting of professionals, SMART will be your experienced full-time partner for the development and sustainability of your business.

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