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W&P – Absence Of Indonesian Version of An Agreement (SEMA 3/2023)

Since its enactment in 2009, Law No. 24 of 2009 on the National Flag, Language, Emblem, and Anthem (“Language Law”), as implemented by Presidential Regulation No. 63 of 2019 on the Use of the Indonesian Language (“PR 63/2019”), has sparked a number of controversies, particularly because in 2015, the Supreme Court nullified certain agreements involving Indonesian parties that were signed only in English (“2015 Decisions”).

In contrast to the 2015 Decisions, the Supreme Court recently issued writing guidelines through Circular Letter No. 3 of 2023 (“Circular Letter 3/2023”), which may stir another round of confusion as it states that the absence of an Indonesian translation of an agreement involving a foreign party cannot serve as grounds for annulment unless it can be proven that it involves bad faith on the part of either party. However, many practitioners express scepticism about the legal certainty and subsequent implementation of Circular Letter 3/2023 for the reasons elaborated below. In light of these concerns and to proactively mitigate potential risks and issues, we advise our clients to persist in translating and executing their foreign language agreements with Indonesian parties, as much as practically feasible.

  1. Legitimacy of Circular Letter 3/2023
    Unlike the Language Law and PR 63/2019, which are legally binding as positive laws in the Indonesian legislative system, Circular Letter 3/2023 merely serves as guidance for all judges within the Supreme Court’s jursidiction. Hence, from a legal standpoint, Circular Letter 3/2023 cannot override or supersede the provisions of the Language Law and PR 63/2019.
  2. Binding Force of Circular Letter 3/2023
    Circular Letter 3/2023 lacks external binding force, implying that it does not carry legal or regulatory authority that compels external entities to comply with its provisions and it does not have the power to create legally binding obligations or requirements for individuals or organizations outside of its issuing authority. As a result, other judicial venues, such as an arbitral tribunal, may develop their own interpretations of the implementation of the Language Law and PR 63/2019.
  3. Tendency of Inconsistency by the Indonesian Supreme Court
    In practice, the Indonesian Supreme Court demonstrates a notable tendency of inconsistency, often disregarding its own circular letters due to their perceived lack of binding authority. A pertinent example is Circular Letter 1/2022 issued in 2022, which outlined that only the Ministry of Cooperatives could initiate bankruptcy proceedings against problematic cooperatives. Despite the existence of this circular letter, the Supreme Court accepted submissions of bankruptcy petitions in the cases of Sejahtera Bersama Cooperative in January 2023 and Pracico Inti Utama Cooperative in February 2023. In both instances, the Supreme Court adjudicated the cases on their merits, even though neither of them had been filed by the Ministry of Cooperatives. Notably, the Supreme Court did not make any reference to or consider Circular Letter 1 of 2022 in its decisions on those bankruptcy cases.