Answers to Certain Questions Relating to Language of Agreements
- Law No. 24 of 2009 dated July 9, 2009 on National Flag, Language, and Coat of Arms, and Anthem (“Law 24”); and
- Presidential Regulation No. 63 of 2019 dated September 30, 2019 on Use of Indonesian Language (“PR 63”).
- Article 31(1) of Law 24 requires that any agreement signed by an Indonesian or an Indonesian entity be executed in Indonesian language.
- Since issuance of Law 24 (until the issuance of PR 63), the acceptable practice with regard to the requirement to use Bahasa Indonesia in agreements is as follows:
- Agreements are negotiated in English and are signed in English and Indonesian at the same time. This applies to (i) agreements signed by all Indonesian parties, and (ii) agreements signed by an Indonesian party and a foreign party.
- Agreements are negotiated in English, and signed in English only with a provision in the agreements that requires the parties to sign an Indonesian version of the agreements within a certain period of time and the Indonesian version will apply retroactively as of the date of the English version of the Agreements.
- The English version prevails in the event of any conflict between the English and Indonesian versions.
- In connection with point (ii) above, there is a waiver that no parties will claim termination of their agreement due to the lack of the Indonesian version of the agreement.
- There is at least one case in which a court (including the Supreme Court as the case went to appeal) nullified an agreement that had been executed in English only.
- PR 63 is promulgated to implement, among others, Article 31 of Law 24.
- Articles 26(3) and 26(4) of PR 63 provide additional guidance on languages of agreements, as follows:
- The English version (or any other foreign language version) of an agreement is used as the equivalent (padanan) or translation (terjemahan) of the Indonesian version of such an agreement in order to align or conform the understanding of the parties.
- In the event there is any different interpretation between the Indonesian version and the English version (or any other foreign language version), then the prevailing version will be the version agreed by the parties.
- Questions and Answers
- When do parties sign an agreement in Indonesian?
Article 31 of Law 24 does not expressly require that the Indonesian version of an English agreement be made at the same time (or before) the English version is executed by the parties.
Article 26(3) of PR 63 now suggests the English version (or any other language version) of an agreement is used as an equivalent (padanan) or translation (terjemahan) of the Indonesian version of the agreement. In our view, this should be reasonably interpreted to mean that the Indonesian version must exist first before the equivalent (padanan) or translation (terjemahan) is made.
Consequently, as of the issuance PR 63, if parties wish to have an agreement in English, then such agreement must be signed in Indonesian and English languages simultaneously.
- Given PR 63, is there any risk of nullification for any English agreement that had been translated into Indonesian after the signing of the English version due to the fact that the Indonesian version was made after the English version had been executed?
As PR 63 is effective expressly as of September 30, 2019, there should not be any risk of nullification for any such agreement that was translated into Indonesian after the English version had been executed solely due to the fact that the Indonesian version was made after the English version had been executed.
- Can an agreement signed by Indonesian parties only be made in English too?
There is no provision in Law 24 and PR 63 that prevents two or more Indonesian parties from entering into agreements in English (or any other language) and Indonesian.
- Can Indonesian parties to an agreement that is signed in English and Indonesian elect the English version as the governing language?
There is no provision in Law 24 and PR 63 that prevents two or more Indonesian parties from electing English (or any other language) as the governing language of their agreement.
- Can parties elect the English version of an agreement as the governing language of the agreement?
Yes, Article 26(4) of PR 63 expressly allows Indonesian and foreign parties to an agreement to elect the governing language of their agreement.
November 20, 2019
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- November 20, 2019