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On August 31, 2015, the Supreme Court (MA) has decided that Loan Agreement between Nine AM Ltd. And PT Bangun Karya Pratama Lestari (KPL) was cancelled because it violated the Law Number 24 of 2009 regarding The State Flag, Language, Emblem and The National Anthem, related to the use of language in contracts with foreign parties.

The Supreme Court uphold 2 (two) court decision in the lower level,The Jakarta High Court Number: 48 / PDT / 2014 / PT.DKI dated May 7, 2014 and West Jakarta District Court decision Number: 451/PDT.G.2013/PN.JKT.BRT dated June 20, 2013, which stated the Loan Agreement between the Nine AM Ltd and BKPL dated 23 April 2010 was cancelled(null and void).

In 2010, Nine AM Ltd. and BKPL agreed to enter into aLoan Agreement. Based on that agreement BKPL received a loan from Nine AM Ltd of USD 4,422,000. The agreement was made in English language without any explanation or translation in Bahasa Indonesia.

In Article 18 of the Loan Agreement, regarding choice of law, the agreement was made under Indonesian law and regulations. They also agreed to resolve any dispute arises from the agreement before the West Jakarta District Court.

To ensure the enforcement of the agreement, the parties agreed to enter into a fiduciary agreement of 6 (six) Caterpillar 775 F trucks, under the Deed Number 33 dated April, 27 2010 which was made before Popie Savitri Martosuhardjo Pharmanto, SH, Notary and PPAT in Jakarta. This agreement was made in Indonesian language.

After 2 years, in 2012 KPL filed a lawsuit againstNine AM Ltd., claims that the Loan Agreement is null and void sincethe Loan Agreement was made in English, without any Bahasa Indonesia version. BKPL stated that the agreement violated the lawNumber 24 of 2009 regarding The State Flag, Language, Emblem and The National Anthem (Language Law).

BKPL arguedthat the Loan Agreement did not fulfill one requirementofthe legality of an agreement under Article 1320 as well as Article 1335 and Article 1337 of the Indonesian Civil Code.

Article 31, paragraph (1) of the Language Law provides that Bahasa Indonesia must be used in a memorandum of understanding or agreement that involving national institutions, government institutions of the Republic of Indonesia, Indonesian private institutions or Indonesian citizens.If the agreementis made with foreign parties then it also must be preparedin foreign language and/or English version.

The judges set asidethe clarification made by the Ministry of Justice and Human Rights of the Republic of Indonesia (MOHLR) in the minister’s letter No. M.HH.UM.01.01.35dated December 28, 2009 concerning the implications and implementation of Law No. 24 of 2009. The Minister expressly clarified that the use of English language ini an agreement does not violate the formal requirements stipulated in Language Law until a Presidential Regulation, as mandated by The Language Law in Article 40, is issued. The Presidential Regulation, as contained in Article 40 of Language Law, willprovides further guidance on the use of Indonesian as referred to in Article 26 through Article 39 stipulated in Presidential Regulation.

However, the Judgesof the viewthat Presidential Regulation cannot waive the word “shall” as stated in Article 31 paragraph (1) of Language Law, because the Presidential Regulation hasa lower position than The Language Law.

The letter from the Minister of Justice and Human Rights can not set asidethe provisions stipulated in the Languange Law. Therefore,sinceThe Loan Agreement was not made in Bahasa Indonesia,it was violatedthe Language Law.

As the Loan Agreement has been cancelled, accordinglythe Fiduciary Agreement which wasan accessoir agreement also has been cancelled. However, the Supreme Court orderBKPL as plaintiff to return the remaining loan from Nine AM Ltd. In the amount of USD 115,540.

The debates continue, although the obligation to use Bahasa Indonesia in the agreement is stated in the Language Law, howeverthe Language Law does not provideany sanctionsif the agreement is made in other language.

For further information on this matter please contact:


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