Indonesia: Court Nullifies English Language Contract

Last Updated: 24 February 2016
Article by Johannes C. Sahetapy-Engel

On June 20, 2013, the District Court of Jakarta Barat nullified a Loan Agreement executed only in English, concluding that contracts involving Indonesian parties must be written in Bahasa Indonesia, under Decision No. 451/Pdt.G/2012/PNJkt.Bar.

The District Court based its decision on Law No. 24 of 2009 on Flag, Language and Coat of Arms and National Anthem ("Law 24/2009"). Under Law 24/2009, Indonesian language is required in any MOU or agreement involving Indonesian parties. The District Court interpreted that provision to mean that an agreement not using Bahasa Indonesia is void as a matter of law.

The District Court decision was affirmed on May 7, 2014, by the Jakarta High Court in Appellate Decision No. 48/Pdt/2014/PT.DKI. In its considerations, the High Court opined that the lower court decision was legally sound, and because there were no new contrary facts submitted by the appellant, the High Court affirmed the decision entirely.

The appellate decision was notified to the parties on September 1, 2014, and the appellant filed for appeal with the Supreme Court on September 11, 2014. As of the time of writing, the case is ongoing at the Supreme Court.


In the District Court case, the court nullified a loan agreement between PT Bangun Karya Pratama Lestari ("BKPL") and NINE AM Ltd ("NINE"). Under the loan agreement, NINE provided a loan to BKPL in the amount of US$4,422,000. The choice of law provision designated Indonesian law to govern the agreement, which was written only in English. A deed of fiduciary security executed in Bahasa Indonesia was concluded to secure the loan.

Starting from December 2011, BKPL discontinued repayment, resulting in BKPL defaulting on the loan. According to the District Court decision, up until that date, BKPL had repaid US$4,306,460.

After issuing a demand letter (somasi), and receiving no response, NINE petitioned the court seeking payment of the overdue principal plus interest, to which BKPL responded with a tortious act claim challenging the loan agreement under Law No. 24/2009, because it was made only in English language.


Laws and Regulations on Language

Article 30 of Law No. 24/2009 provides that Indonesian language must be used in any MOU or agreement involving the State agencies, Indonesian government institutions, Indonesian private entities, or individuals of Indonesian nationality. Any MOU or agreement involving foreign parties may also be written in the national language of the foreign party and/or English. Indonesian does not have to be selected as the governing language, but Indonesian text is required if the agreement includes an Indonesian party, including Indonesian legal entities that are foreign-owned, such as PMA companies.

Article 40 of Law 24/2009 stipulates that further provisions on the use of Indonesian language shall be governed by a Presidential Decree, and Article 73 states that any regulations required to implement the law shall be promulgated within two years after enactment of the law (July 9, 2009).

We note that the Minister of Law and Human Rights ("MOLHR") issued an informal guidance letter in 2009, which principally expressed that the use of English language in an agreement does not violate the formal requirement provided under Law 24/2009, at least until such time that a Presidential Decree is issued on the subject. To date, no Presidential Decree has been issued. Nevertheless, the MOLHR's informal guidance was not binding on the District Court, and it should not be relied upon to justify execution of English-only agreements.

Recently, Government Regulation No. 57 of 2014 on Development, Guidance, and Protection of Language and Literature, as well as Improvement of Indonesian Language Function ("GR 57/2014") was issued to implement certain provisions of Law 24/2009. As provided under Article 5(2) point (e) of GR 57/2014, one of the functions of Bahasa Indonesia as the state language is to facilitate transactions and commercial documentation. Although there is no provision in GR 57/2014 that explicitly requires Indonesian language in a contract, this provision can be perceived as affirming the District Court's position that Indonesian language should be used in agreements involving an Indonesian party.

Indonesian Civil Code ("ICC")

Under Article 1320 of the ICC, an agreement must satisfy the following conditions in order to be valid:

  1. consent of the parties to be bound;
  2. legal capacity to enter into an obligation;
  3. specific subject matter; and
  4. permitted cause.

Article 1335 provides that any agreement without a permitted cause, or concluded pursuant to a fraudulent or prohibited cause, shall not be enforceable. A prohibited cause is any cause prohibited by law or that violates the moral or public order, as provided under Article 1337. We commonly understand a prohibited cause to mean that the object of the agreement itself is illegal, such as gambling. A more appropriate basis would have been Article 1338 of the ICC, which provides that an agreement not executed in accordance with the law (such as Law No. 24/2009) cannot bind the individuals concerned.


In the District Court decision, the court granted the request of BKPL; hence, the Loan Agreement entered between BKPL and NINE was declared null and void, with considerations as follows.

  1. Under the ICC, non-fulfillment of the conditions of consent and legal capacity (items 1 and 2 of Article 1320) causes an agreement to be voidable, while non-fulfillment of a specific subject and a permitted cause (conditions 3 and 4) causes an agreement to be void by law;
  2. Pursuant to Articles 1335 and 1337 of the ICC, an agreement that constitutes a prohibited cause or a violation of law causes an agreement to be declared void by law;
  3. As provided under Law 24/2009, Indonesian language must be used in any MOU or agreement involving Indonesian parties; therefore, an English-only agreement involving Indonesian parties executed after the date the law was enacted is in violation of Law 24/2009;
  4. Neither the absence of an implementing regulation Presidential Regulation, nor the issuance of informal guidance by MOLHR, can exempt Article 31 of Law 24/2009, which requires the use of Bahasa Indonesia for any agreement involving Indonesian parties, because within the hierarchy of Indonesian laws and regulations, a Law (undang-undang) is of higher authority than any Presidential Regulation or subsequent implementing regulation;
  5. As a consequence, the Loan Agreement violates Law 24/2009, causing non-fulfillment of the conditions for a valid agreement, i.e., the condition of a permitted cause under the ICC; therefore, the Loan Agreement shall be declared null and void; and
  6. As the Loan Agreement is void and cannot be enforced, the deed of fiduciary guaranty as the derivative agreement (accesoir) of the Loan Agreement shall also be declared null and void.

In the District Court decision, the court ordered BKPL to repay the remaining loan principal in the amount of US$115,540, as the consequence of voiding the agreement, i.e., had the agreement never been entered, the principal amount never would have been loaned.

While we may have a different view about the legal basis for revoking the loan agreement, we note that the court was at least consistent in its decision, insofar as it required the borrower to repay the principal amount. Having nullified the agreement, the court did not address any interest owed or lost profit that the lender may have suffered during the loan term.


Although the decision is not yet final and binding (pending the decision on appeal), in the meantime, any party contracting with an Indonesian counter-party, be it in a cross-border or domestic transaction, needs to anticipate the applicability of Law 24/2009 in this regard. A bilingual agreement (or separate versions in each language) is preferable. For any English-only agreement involving Indonesian parties concluded after the enactment of Law 24/2009 (July 9, 2009), it is advised to re-execute the agreement in Indonesian (or bilingual) version so as not to leave it vulnerable to challenge. It is also advised to state the effective date expressly in the English version of the agreement, so that re-execution of the Indonesian (or bilingual) will follow the effective date of the initial English version.

Note also that although Law 24/2009 requires the use of Indonesian language, the law does not require Bahasa Indonesia to be the governing language. Accordingly, English can prevail as the governing language, so long as an Indonesian language version is also executed and the execution of the contract is not subject to any other particular formalities required under the regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions