Indonesia has a strict stance in the use of Indonesian language, the Bahasa Indonesia. Law No. 24 of 2009 on National Flag, Language, Symbol, and Song and Presidential Regulation No. 63 of 2019 on the Use of Indonesian Language (together, the Language Law) provides that any agreement made by an Indonesian entity must be made in Indonesian language. The Language Law further specifies that the translation of the agreement could be made as “an addition to the Bahasa Indonesia version” if there is involvement of foreign entity as a party to the agreement. It shook and disrupted the Indonesian market practice since the wording of the provision is too straight forward and too simple. It opens no room for other interpretation. It indicates that the Bahasa Indonesia version must be written prior to the foreign language translation version. Consequently, for example, if any Indonesian entity would like to obtain loan from a foreign bank, the agreement must be translated to Bahasa Indonesia first before the parties could sign the agreement.
On a separate note, however, the Language Law does not provide any sanctions if an agreement is not made in Bahasa Indonesia.
It is already clear that even a foreign law governed documents must be “made” in Bahasa Indonesia if it involves an Indonesian entity as a party. A problem arises towards a document that is not an agreement per se but requires an acknowledgement from an Indonesian entity. Many banking documents (or any other documents where one party has more leverage than the other party) are usually a one-way document that requires the counterpart to give “acknowledgment” to the provision of the documents no matter what. If we look closely at those documents, the provisions under this type of documents require the counter party to acknowledge and “agree” to the provisions under those documents. This type of documents is intended to obtain other party’s agreement. Consequently, this type of documents could be construed as an agreement that falls under the subject of the Language Law.
Controversial Court Judgment
The status quo above was enhanced by a controversial Indonesian court decision. In their decision, West Jakarta District Court, which was later strengthened by the Jakarta High Court and later on the Indonesia Supreme Court (the Nine AM Decision), decided that the loan agreement between Nine AM Ltd., as lender, and PT Bangun Karya Pratama, as borrower, was null and void on the basis that the loan agreement was made in English only, although it was governed by a non-Indonesian law. The Nice AM Decision states that it violates Article 1320 of the Indonesian Civil Code, lawful cause, because it breaches the Language Law.
As a note, the Indonesian Civil Code provides that an agreement needs to fulfil four elements to be valid, i.e., there must be (i) consent of the parties therein, (ii) capacity of the parties to enter into the agreement (iii) a specific subject and (iv) lawful cause. The Indonesian Civil Code further elaborates that a lawful cause is a cause that does not violate (i) the law, (ii) decency norm or (iii) public order.
However, please note that Indonesian judges are not bound to a prior decision made by other judges. Decision that has been made by other judges, such as the Nine AM Decision, will be taken to not in their consideration. However, Indonesian judges operate in an inquisitorial legal system. Indonesian judges have very broad fact-finding powers and a high level of discretion as to the manner in which those powers are exercised. Accordingly, there is no guarantee that one judge’s decision will be the same with other judge’s decision.
What to Do
We are of the opinion that any agreement made by an Indonesian entity must be made in Bahasa Indonesia. Although it is a foreign law governed document, will be settled in an international arbitration, and there is only one Indonesian entity as a party to the agreement, there must be a Bahasa Indonesia version of such agreement.
It is worth to mention that a foreign arbitration award needs to be registered to the Central Jakarta District Court. Upon the due registration of the foreign arbitration award, the Central Jakarta District Court is required to issue an enforcement order to enforce an award for so long as such issue does not contravene Indonesian public order. A court enforcement order with respect to a foreign arbitration award is enforceable and shall be deemed as a final and binding judicial civil decision. In practice, however, the Indonesian entity could submit a new case towards the agreement (e.g., the use of English language only on the agreement made) to a district court that could result on the postponement of enforcement of the arbitration award.
The safest approach is to have any agreement made in bilingual format so that there is no ambiguity on which version was made first. Moreover, there should be no explicit provision that states that the Bahasa Indonesia version is a “translation”, which could indicate that the Bahasa Indonesia version is made after the other language version.