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The Application of Language Law on Agreement

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The Application of Language Law on Agreement

In 2019, President of Indonesia published a President Decree Number 63 of 2019 on the Use of Indonesian Language (“President Decree”) which is the implementing regulation of Law Number 24 of 2009 on Flag, Language and State Symbol, as well as the National Anthem (the “Language Law”). Both regulations are a manifestation of nationalism in order to accomplish the unity and integrity of the Indonesian nation, also to standardize the use of the flag, language, state symbol and national anthem.

The President Decree declares that in official speeches by the President, Vice President and other state officials Indonesian language must be used both domestically or aboard. Furthermore, President Decree also regulates that Indonesian language must be used in memorandum of understanding or agreements involving state institutions, government of the Republic of Indonesia, Indonesian private institutions or individual Indonesian citizens and for agreements involving foreign parties, also written in the foreigner’s national language or English.

A question arises “what are the implications of agreements involving foreign parties and not written in Indonesian Language?” A business transaction will be made through an agreement. Under the Indonesian law, in order to be valid an agreement must satisfy the following four conditions under the provision of Article 1320 of the Indonesian Civil Code (“ICC”), namely: a) there must be consent of the individuals who are bound thereby; b) there must be capacity to enter into an obligation; c) there must be a specific subject matter; d) there must be a permitted cause. First and second condition are called as subjective conditions, if there is violation of these two things the agreement is voidable. Then, the third and fourth conditions are called as objective conditions, and if there is violation of these two things the agreement is null and void.

The Language Law does not stipulate any sanctions for those who violate the obligation to use Indonesian Language in the memorandum of understanding or agreement and if considered from 4 conditions of a valid agreement as, the foreign language agreement does not violate those 4 conditions. But however, the Supreme Court of the Republic of Indonesia on 31 August  2015 has made a decision regarding the cassation application filed by Nine AM, Ltd., a legal entity established by law and domiciled in Texas, United States of America, against PT Bangun Karya Pratama Lestari (“PT BKPL”), a limited liability company established under the law of the Republic of Indonesia. One of the main points of dispute between PT BKPL (plaintiff) and Nine AM, Ltd (defendant) is regarding PT BKPL’s claim to the West Jakarta District Court to declare the loan agreement between the disputed parties as null and void since it violates the Article 31 paragraph (1) of the Language Law. In this case the District Court of West Jakarta Court considered that, due to the word “mandatory” under the Article 31 of the Language Law , the Loan Agreement made by the parties did not fulfill that provision and was then declared as violating the permitted cause under Article 1335 and 1337 of the ICC (Decision Number 451/Pdt.G/2012/PN Jkt Bar, page 61). This decision was strengthened by the decision of the High Court of DKI Jakarta Number 48/PDT/2014/PT DKI and the decision of the Supreme Court of Number 601 K/Pdt/2015.

The consideration of the judges in declaring that the agreement violated the permitted cause of a valid agreement since it violates the Language Law clearly contradicts Subekti’s opinion in his book of Hukum Perjanjian which states that the cause referred to in Article 1335-1337 of the Indonesia Civil Code is nothing but the content of the agreement. The same thing was argued by the former Chief of the Supreme Court, Prof. DR. Wirjono Prodjodikoro, S.H. in his book Asas-Asas Hukum Perjanjian, namely causa in agreement law is the content and purpose of an agreement. This is in line with the dissenting opinion by the Supreme Court Judge Sudrajad Dimyati, S.H., M.H. in the decision of the Supreme Court which he stated that judex facti was wrong and violates the principle of justice. It is wrong because a lawful cause is an objective condition of the agreement, which in essence is the content or material of the agreement. In addition, it would be unfair to Nine AM Ltd and caused losses it since it was unable to obtain any benefits from the loan. In contrast, PT BKPL got benefits from the truck rental services they bought using a loan obtained from Nine AM Ltd.

Artha Sitorus