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The Validity of Foreign Language Agreement Post SEMA No. 3/2023

Author: Krisna Murti Ardianto, Theodorus Steven Sitanggang, Thu, Jan 4th 2024, 15:16

Introduction

The Supreme Court of Indonesia (“MARI”) recently issued the Supreme Court Circular No. 3 of 2023 on The Implementation of the Formulation of the Results of the Plenary Meeting of the Supreme Court Chamber in 2023 as a Guideline for the Execution of Duties for the Judiciary (“SEMA No. 3/2023”). SEMA No. 3/2023 provides guidelines for the implementation of provisions of law and consistency of court decisions. One of the material substances in SEMA No.3/2023 is regarding the result of the plenary meeting of the civil chamber, specifically on general civil matters, which in SEMA No. 3/2023 has been agreed that agreements between civil institutions and/or Indonesian citizens with foreign party made without an Indonesian translation can not be the reason for cancelation of such agreement. This article will provide deeper insights regarding SEMA No.3/2023 especially the validity of foreign language agreements in Indonesia.

Foreign Language Agreements in Indonesia

Article 31 of Law No. 24 of 2009 on Flags, Language, and National Emblem, as well as National Anthem (“Law No.24/2009”), stipulates that (1) the Indonesian language must be used in a memorandum of understanding or agreements involving state institutions, government agencies of the Republic of Indonesia, private Indonesian institutions, or individual Indonesian citizens; (2) Memorandum of understanding or agreements as referred to in paragraph (1) involving foreign parties shall also be written in the national language of the foreign party and/or the English language. This article mandates the use of the Indonesian language in agreements involving Indonesian parties. On the other hand, the national language of the foreign party or the English language is also utilized. Therefore, agreements involving Indonesian and foreign parties must be written in the Indonesian language and a foreign language/English. However, Law No.24/2009 does not state that the legal implication of an agreement made in a non-Bahasa Indonesia will be deemed null and void.

Furthermore, Article 26 of Presidential Regulation No. 63 of 2019 on the Usage of Bahasa Indonesia (“PR No. 63/2019”) provides that agreements involving foreign parties shall be drafted in the national language of the foreign party and/or the English language. PR No. 63/2019 regulates the use of the national language of the foreign party and/or English as equivalents or translations of the Indonesian language to ensure a common understanding. PR No. 63/2019 also explicitly does not stipulate that agreements exclusively drafted in a language other than Bahasa Indonesia are legally void.

 

Implication of SEMA No. 3/2023

According to Article 8, paragraphs (1) and (2) of Law No. 12 of 2011 on the Formation of Laws and Regulations, any law enacted by other government institutions, including MARI, shall be binding if its enactment is mandated by legal provisions or derived from conferred authority. SEMA (Supreme Court Regulation) is considered an integral part of the legal hierarchy in Indonesia, thereby possessing the authority to bind any entity subject to its provisions. MARI is empowered under Article 79 of Law No. 14 of 1985 by the Supreme Court to formulate supplementary regulations in cases of normative gaps or regulatory deficiencies. In conclusion, SEMA No. 3/2023 is to be regarded as a guiding document for dispute resolution in the Supreme Court, High Court, and District Court.

Before the issuance of SEMA No. 3/2023, inconsistencies existed in court decisions concerning the enforceability of agreements in foreign languages. Judges, in various cases, adhered to the Jurisprudence of MA RI No. 1572 K/Pdt/2015 which MA RI once set the normative rule regarding the cancelation of agreement due to lacking Indonesian language as null and void. The consequence of this ruling by jurisprudence is that many parties in agreements sought to terminate/cancel the agreement in bad faith just to avoid obligations. One of the justices, Sudrajat Dimyati who ruled the case No. 601 K/Pdt/2015 stressed out this issue in his dissenting opinion.

This new set of guidelines aims to harmonize the judicial stance on the validity of foreign language agreements. It is crucial to note, however, that SEMA No. 3/2023 does not encompass all types of foreign language agreements. SEMA No. 3/2023 specifies that a foreign language agreement remains valid if one of the parties to the agreement is a foreigner. Consequently, this implies that an agreement between entirely local Indonesian institutions and/or local Indonesian citizens, made in a language other than Bahasa Indonesia, may be subject to court nullification.

Moreover, any deviation from the guidelines in SEMA No. 3/2023 by a judge does not automatically result in the imposition of sanctions or clear legal consequences. This is attributed to the absence of explicit regulations governing sanctions for breaches of SEMA guidelines.

Commentary

The new SEMA No. 3/2023 could offer a welcome relief for business actors involved in foreign language agreements in Indonesia. Nevertheless, it is crucial to recognize that SEMA No. 3/2023 serves as a guiding framework and does not prescribe any sanctions for deviations from its provisions. The absence of explicit penalties underscores the need for a comprehensive legal framework to address potential disputes arising from the interpretation or application of SEMA No. 3/2023, ensuring a more robust and reliable foundation for the resolution of contractual matters involving foreign languages in the Indonesian legal landscape.

This article has been contributed by Krisna Murti Ardianto and Theodorus Stevem Sitanggang of Armila Rako, a corporate law firm based in Jakarta. The above article does not, and is not intended to, constitute legal advice; instead, this article is for general informational purposes only. Information contained in this article may not include the most up-to-date legal or other information. Should the readers have any inquiries, they can contact the authors at krisna.ardianto@armilarako.com and theodorus.steven@armilarako.com. Any reliance on this article is at the user’s own risk.