Article 31 of the Language Law mandates the use of Indonesian language for memorandum of understanding or agreement. In the case of agreements involving another party which is not Indonesian, the agreement may be in bilingual – Indonesian and another language.
On 29 December 2023, the Indonesian Supreme Court issued Circular Letter No. 3 of 2023 with guidance on interpretation of Article 31 of Law No. 24 of 2009 on National Flag, Language, Emblem and Anthem (referred to as the Language Law).
This requirement has led to several court decisions rendering void agreements that are not at least bilingual – where one of the parties is Indonesian.
It is against this backdrop that the Supreme Court issued the circular letter.
The letter confirms that an agreement is not automatically rendered void just because it does not have an Indonesian language version. The party disputing the agreement should prove "that the absence of an Indonesian translation is due to bad faith by one of the parties". This is the relevant excerpt from the circular letter:
"Indonesian private institutions and/or Indonesian individuals, who enter into an agreement with a foreign party in a foreign language which is not accompanied by an Indonesian translation cannot be used as a reason for canceling the agreement, unless it can be proven that the absence of an Indonesian translation is due to bad faith by one of the parties."
Therefore, it appears that the burden is on the party seeking to dispute the agreement, to prove that the lack of an Indonesian language version is due to lack of good faith.
This circular is certainly welcome in situations where parties have entered into an agreement without the benefit of Indonesian counsel - a lifeline has been given to these contracts that have left out the Indonesian language.
For parties who have not or are about to enter into a contract with Indonesian parties, the question remains whether one can dispense with the Language Law requirement in light of this Supreme Court circular letter. It is not certain whether the local party could, in the future, raise an argument of bad faith to have the agreement cancelled. In a jurisdiction such as Indonesia, it might be best to have all bases covered so that the parties can focus on the substantive issues of any future dispute.
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