The court noted that Article 31 of Law 24/2009 requires that any contract in which an Indonesian party is involved, whether public or private, be concluded in Bahasa. In the absence of a Bahasa translation, the loan agreement violated Article 31 of Law 24/2009, resulting in an illegal reason for the contract. Although Law 24/2009 does not expressly provide for the consequences of non-compliance, the Court relied on Article 1335, in conjunction with Article 1337 of the Indonesian Civil Code, to declare the loan agreement null and void. Article 1335 provides, inter alia, that a contract concluded for unlawful cause is invalid. Article 1337 also states that a cause is illegal if it is prohibited by law or if it is contrary to morality or public order. To avoid this problem and ensure that the transaction is watertight, the Indonesian version of the agreement should be signed at the same time as the foreign language version. The parties can then of course choose the predominant language of the contract if there are discrepancies between the Indonesian version and the foreign language version. Comment from Assegaf Hamzah & Partners, a member firm of Rajah & Tann Asia: Although the regulation provides some clarity on the mandatory use of the Indonesian language, it does not take into account the now widely accepted market practice developed over the 10-year period. With the new regulations, it would be desirable for companies to prepare and execute the Indonesian version of their agreements at the same time as the current English version. Therefore, companies should consider the time and resources they need to prepare the Indonesian version before closing a deal. Third, in accordance with Indonesian civil law, the Court held that the fiduciary security agreement or, in that regard, any type of security agreement, was ancillary to a loan agreement.
Moreover, the Regulation does not definitively clarify the consequences of non-compliance with the Language Law, in particular in the light of the judgment of the West Jakarta District Court in the case of PT Bangun Karya Pratama Lestari v. Nine AM Ltd, in which the Court ruled that an agreement involving an Indonesian party that is not in the Indonesian language, is illegal and therefore null and void. During the 10-year interval between the promulgation of the language law and the adoption of the regulation, the market has adopted a common practice where the parties usually prepare and sign the Indonesian version of the agreement after signing the non-Indonesian (usually English) version of the agreement. While the regulation reaffirmed the right of the parties to agree in their agreement on the language of the government (which does not necessarily have to be Indonesian), new questions arise as to when the Indonesian version will be carried out. We also appreciate that, for certain transactions where the schedule is very short, the foreign and Indonesian parties undertake in writing to sign the Indonesian version of the agreement within a certain period of time. We believe that this approach should no longer be considered by foreign parties, especially in the case of high-value transactions, as it allows the Indonesian side to claim that the agreement is invalid without the Indonesian version of the agreement. For several years, Indonesian law (Article 31 of Law No. 24 of 2009 on the National Flag, Language, Emblem and Anthem, known as the „Language Law“) stipulates that declarations of intent, contracts or agreements involving Indonesian government institutions, Indonesian private institutions or Indonesian citizens must be in Indonesian Bahasa, that is, in the Indonesian language („Bahasa“). Article 31(2) of Law 24/2009 expressly authorises the performance of a contract in more than one language. .