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The Formal Condition of an Agreement

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The Formal Condition of an Agreement

Different interpretations regarding the mandatory use of the Indonesian language in the agreement can be seen in the District Court of Amlapura decision, namely Decision Number 254/Pdt.G/2019/PN Amp. In this case, Ford (a British citizen) is married to Cheung (a Chinese citizen). Since 2009 they have lived in Bali and have been 100% shareholders of PT Alba Indah (an Indonesian legal entity) which later they divorced and agreed to share the joint assets including 100% of the shares of PT Alba Indah which they owned. In implementation of the agreement, Ford claimed that Cheng did not fulfill some parts of the agreement and demanded that the agreement be annulled based on the Language Law. The court decided that the violation of the Language Law was not a violation of objective conditions of an agreement under the Article of 1320 paragraph 4 of the ICC. The court argued, “as long as the motive for making the agreement is not a false one, it is not prohibited by laws and/or is not based on a motive that is against decency and public order, so an agreement that does not fulfil the provision under Article 31 of the Language Law is still valid. Besides that, the Language Law does not stipulate sanctions for violations of Article 31.”

In Indonesia we know that there is a freedom of contract principle, but the freedom itself is not absolute, because must be in accordance with decency and public also there are still other formality conditions that must be fulfilled, even though it is regulated separately from the 4 legal conditions of the agreement in 1320 of the ICC. For example, Article 1682 of the ICC states that the agreement to grant immovable objects must be carried out by a notarial deed. Although this article is considered as no longer valid with SEMA No. 3 of 1963. Nevertheless, according to Prof. Subekti in his book Hukum Perjanjian “if such an agreement does not meet the formalities stipulated by law, then it is null and void”. However, this formality is not the cause of the agreement because as we know from Subekti, the cause itself is the content of the agreement. Thus, an agreement that only uses a foreign language should be declared invalid because it does not meet the formalities regulated by Language Law. So, we can see that the Amlapura District Court’s decision no 254/pdt.g/2019/PN.Amp by stating that the obligation to use Indonesian in the agreement is not related to the permitted cause is correct. This would mean that the considerations under the Supreme Court’s Decision No. 601 K/Pdt/2015, stating that the Loan Agreement made by NINE AM Ltd and PT BKPL is null and void due to the non-fulfillment of the legal requirements of the fourth agreement, namely the existence of a lawful cause, may not be precise.

The decision of the Supreme Court of the Republic of Indonesia no 601K/PDT/2015 has become a matter of concern for foreign investors. This was revealed in a training regulations ‘Study for the Amendment to the Law’ in Osaka, Japan on 12-22 February 2017. During the meeting, Japanese investors admitted that they were quite surprised when they heard that there was a court decision canceling the agreement that did not use Indonesian language. This proves that in the midst of increasingly competitive economic competition, foreign investors do not only consider the legal regulations of a country but also how the country’s courts decides legal problems, especially issues involving business with foreign parties.

Indonesia is a sovereign country, and in its sovereignty the use of the Indonesian language for those who make agreements is obligatory by law. Therefore, it is important for business actors to minimize the possibility of losses that will occur by making an Indonesian version of the agreement that will be or has been made to fulfill the requirements of the applicable laws in Indonesia.


Artha Sitorus