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Ada Pertanyaan? Hubungi Kami Ari Pramuditya, Fitri N. Heriani
Seminar on foreign language contract. Photo by: RES
Contracts drawn up in foreign languages, especially English, have become common business practice within the realms of Indonesian contract law and reflect the different backgrounds of the parties involved. However this practice could become outlawed as the country’s courts may move to cancel such agreements, just as they did in the recent case involving Nine AM Ltd and PT Bangun Karya Perkasa.
According to Article 31 of Law No. 24 of 2009on the Flag, Language, State Emblem and Anthem, contracts entered into by Indonesian parties must be drawn up in the Indonesian language. Failure to comply with this requirement may lead to a contract being cancelled, should one of the parties question the language that it is written in. Similar concerns were raised during a discussion held by hukumonline in Jakarta on Thursday, 10 December 2015.
Riyatno, Head of the Center for Legal Aid at the BKPM, explained during the discussion event that while foreign-language contracts were not the primary concern of business investors, they could ultimately lead to legal uncertainties. It is feared that contract cancelations will not only affect parties to individual contracts, but will also have a knock on effect on the investment climate in Indonesia.
According to Mr. Riyanto, the main consideration for foreigners looking to invest in Indonesia is the economic side of any deal, and this is followed by legal certainty and political stability. “Even so, legal certainty is still an extremely important area,” Mr. Riyatno told hukumonline after he had delivered an address at the event entitled, “Cancellation of Foreign-Language Contracts: Problems and Anticipation.”
During his address, Mr. Riyatno drew attention to three implications for investment in Indonesia, as regardsthe cancellation of foreign-language contracts?. Firstly, such cancellations would lead to legal and business uncertainties, as well as unease within the business community. Secondly, the cancellation of foreign-language contracts could ultimately trigger a decrease in the flow of foreign investment into the country. And thirdly, the Indonesian government could even find itself being sued through a process of international arbitration.
In order to overcome these potential pitfalls, Mr. Riyatno asserted that all contracts entered into by the Indonesian government and foreign parties, such as oil and gas or renegotiation contracts, should be bilingual in nature. Moreover, if foreign parties are present during contract negotiations, then a translator should also be provided, Mr. Riyanto stressed.
Mr. Riyanto admitted that the BKPM did not currently have any specific policy relating to the use of the Indonesian language in contracts. As a result of this oversight, problems are likely to arise if contracted parties find themselves embroiled in any disputes, as the English language will be used during any arbitration process.
“The use of English language during arbitration is very important. Thus if this matter is not resolved and regulated, then it could become a ticking time bomb,” Riyanto explained.
Also commenting upon the issue was legal practitioner Eri Setiawan, who asserted that the Indonesian language would be used throughout any arbitration proceedings. This is confirmed by Article 27 of Law No. 30 of 1999on Arbitration and Alternative Dispute Resolution, which clearly states that any process of arbitration should be carried out in the medium of the Indonesian language, unless otherwise agreed by both the disputing parties and the arbitrator or tribunal.
“Based on my experience, the use of the Indonesian language is regulated under the Arbitration Law,” Mr. Setiawan explained.
Supreme Court Judge, T. Gayus Lumbuun, also weighed in during the discussions and emphasized that the law required contracts involving state institutions, Indonesian government agencies, private institutions or individuals to be drawn up in Indonesian. This has become a formal requirement in order that any contract be considered enforceable, Lumbuun explained, adding that non-compliance with this requirement would result in any agreement being considered void in law.
However, Mr. Lumbuun also reminded those present at the event that the country’s judges were also authorized to use their discretion, as regards the interpretation of any given legal situation. Indeed, before reaching a decision, judges usually seek the views of experts, lawmakers, or other qualified parties. Thus, different judges may come to hold different views on certain matters.
“If a contract is declared void in law, then lawsuits can also subsequently be filed. This may lead to a case being tried by a more specialized judge, depending on the type of lawsuit that is filed,” Mr. Lumbuun concluded.
(rfs/sp)
Ari Pramuditya, Fitri N. Heriani
Seminar on foreign language contract. Photo by: RES
Contracts drawn up in foreign languages, especially English, have become common business practice within the realms of Indonesian contract law and reflect the different backgrounds of the parties involved. However this practice could become outlawed as the country’s courts may move to cancel such agreements, just as they did in the recent case involving Nine AM Ltd and PT Bangun Karya Perkasa.
According to Article 31 of Law No. 24 of 2009on the Flag, Language, State Emblem and Anthem, contracts entered into by Indonesian parties must be drawn up in the Indonesian language. Failure to comply with this requirement may lead to a contract being cancelled, should one of the parties question the language that it is written in. Similar concerns were raised during a discussion held by hukumonline in Jakarta on Thursday, 10 December 2015.
Riyatno, Head of the Center for Legal Aid at the BKPM, explained during the discussion event that while foreign-language contracts were not the primary concern of business investors, they could ultimately lead to legal uncertainties. It is feared that contract cancelations will not only affect parties to individual contracts, but will also have a knock on effect on the investment climate in Indonesia.
According to Mr. Riyanto, the main consideration for foreigners looking to invest in Indonesia is the economic side of any deal, and this is followed by legal certainty and political stability. “Even so, legal certainty is still an extremely important area,” Mr. Riyatno told hukumonline after he had delivered an address at the event entitled, “Cancellation of Foreign-Language Contracts: Problems and Anticipation.”
During his address, Mr. Riyatno drew attention to three implications for investment in Indonesia, as regardsthe cancellation of foreign-language contracts?. Firstly, such cancellations would lead to legal and business uncertainties, as well as unease within the business community. Secondly, the cancellation of foreign-language contracts could ultimately trigger a decrease in the flow of foreign investment into the country. And thirdly, the Indonesian government could even find itself being sued through a process of international arbitration.
In order to overcome these potential pitfalls, Mr. Riyatno asserted that all contracts entered into by the Indonesian government and foreign parties, such as oil and gas or renegotiation contracts, should be bilingual in nature. Moreover, if foreign parties are present during contract negotiations, then a translator should also be provided, Mr. Riyanto stressed.
Mr. Riyanto admitted that the BKPM did not currently have any specific policy relating to the use of the Indonesian language in contracts. As a result of this oversight, problems are likely to arise if contracted parties find themselves embroiled in any disputes, as the English language will be used during any arbitration process.
“The use of English language during arbitration is very important. Thus if this matter is not resolved and regulated, then it could become a ticking time bomb,” Riyanto explained.
Also commenting upon the issue was legal practitioner Eri Setiawan, who asserted that the Indonesian language would be used throughout any arbitration proceedings. This is confirmed by Article 27 of Law No. 30 of 1999on Arbitration and Alternative Dispute Resolution, which clearly states that any process of arbitration should be carried out in the medium of the Indonesian language, unless otherwise agreed by both the disputing parties and the arbitrator or tribunal.
“Based on my experience, the use of the Indonesian language is regulated under the Arbitration Law,” Mr. Setiawan explained.
Supreme Court Judge, T. Gayus Lumbuun, also weighed in during the discussions and emphasized that the law required contracts involving state institutions, Indonesian government agencies, private institutions or individuals to be drawn up in Indonesian. This has become a formal requirement in order that any contract be considered enforceable, Lumbuun explained, adding that non-compliance with this requirement would result in any agreement being considered void in law.
However, Mr. Lumbuun also reminded those present at the event that the country’s judges were also authorized to use their discretion, as regards the interpretation of any given legal situation. Indeed, before reaching a decision, judges usually seek the views of experts, lawmakers, or other qualified parties. Thus, different judges may come to hold different views on certain matters.
“If a contract is declared void in law, then lawsuits can also subsequently be filed. This may lead to a case being tried by a more specialized judge, depending on the type of lawsuit that is filed,” Mr. Lumbuun concluded.
(rfs/sp)