On 9 July 2009, the Government of Indonesia enacted Law Number 24 of 2009 regarding the National Flag, Language, Symbol and Anthem (Bendera, Bahasa, dan Lambang Negara, serta Lagu Kebangsaan) (the “Law”) which was effective immediately after the enactment. The Law contains 74 Articles divided into 9 chapters. One interesting provision under this Law which may be related to legal services practice such as deals and/or transactions involving foreign parties, is in the chapter on Language (chapter III).
Article 25(3) of the Law sets the Indonesian language as the official language for transactions and commercial documents. Further, Article 31 of the Law stipulates that the Indonesian language (Bahasa Indonesia) must be used in any memorandums of understanding or agreements involving state institutions, government agencies of the Republic of Indonesia, Indonesian private institutions, or individual Indonesian citizens. The Law further provides that if any such agreements involve non-Indonesian parties, the agreements may also be written in the national language of the non-Indonesian party and/or in the English language, where, as the Law states, “all of such texts are equally genuine”.
Recently, this Law (in particular the provisons related to the use of Indonesian language for contracts) draws many controversies as to many of its provision considered to be indistinct and ambiguous, including Article 31. As stated, Article 31 of the Law requiresthat every agreement involving Indonesian parties must now use the Indonesian language. However, the Law itself does not state any sanctions or consequences whatsoever for or in connection with a contract involving Indonesian party which is not made in Indonesian language.
The Law specifically provides that implementing regulations shall be passed at the latest of 9 July 2011 (two year after the enactment of the Law). The market view has been to take a commercial approach to not implementing the Indonesian language requirement strictly until the implementing regulations are in place. Many believe that such view conforms to the common understandings in Indonesia that implementation of a newly-enacted law shall be postponed until its implementing regulation is passed. However, as we often find it difficult to obtain clarity and certainty from Indonesian Government in respect of applicability and interpretation of laws and regulations, there can be no guarantee that the Government would be supportive to the market’s view above.
In a discussion with the representatives of the Ministry of Law and Human Rights and the officials of the DPR which discussed the implementation and legal consequences of the Law, it was stated that the use of Indonesian language is a formal requirement, not a substantive one, so the absence of dual language versions should not be used as a ground to declare contracts invalid. However, this statement is not binding and has not altered the risk that the Law could be used as a defence by Indonesian parties attempting to escape their obligations.