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Indonesian Language Law and its effect in Shipping Contracts

Jagan - January 27, 2016 - 0 comments

In August 2015, the Indonesian Supreme Court upheld the ruling of the West Jakarta High Court in PT Bangun Karya Pratama Lestari v Nine AM Ltd (“Nine AM Case”), which nullified and voided a loan agreement between the parties. This was on the basis that the contract did not have an Indonesian version of the contract and therefore ran foul of the Law 24 of 2009 (“Indonesian Language Law”). This article discusses the possible effect in Shipping Contracts with Indonesian Entities.

  1. Art 31 (1) of the Indonesian Language Law states that “the Indonesian language will be used in MOU’s and agreements involving state institutions, government agencies of Indonesia, private Institutions and individual Indonesian citizens“. Art 31(2) of the same law provides that for MOU’s and agreements involving foreign parties, the MOU / Agreement may also be written in a foreign language and / or English. It therefore suggests that whenever a contract is with an Indonesian Entity, there must an Indonesian Version of the contract.
  2. On the basis of the ruling of the Indonesian Supreme Court in the Nine AM Case, a contract can be declared as null and void if an Indonesian version of the contract is not available at the time of signing the contract. Although Indonesian courts do not follow the system of judicial precedent as in common law countries, given that this ruling has been provided by the Indonesian Supreme Court, it is submitted that the lower courts would follow it.
  3. With respect to carriage of goods, contracts entered could be charter parties (between Owners and Charterers) and / or Bills of Lading (between Carriers and Cargo interests). Invariably, these contracts are in English only. Accordingly, if these Charter parties / Bills of Lading in English are signed with an Indonesian party, they will fall foul of the Indonesian Language Law. It would therefore be possible for an Indonesian entity to resile from this contract if it should benefit them.
  4. Carrier/Owner’s Agent engaged in Indonesia will be Indonesian entities. Art 31(1) of the Indonesian Language Law would therefore apply to govern their relationship with Indonesian parties (shipper/consignee or charterer as the case may be). It is accordingly submitted that any pre-booking or post-shipment contracts between the Carrier/Owner’s Agent should necessarily be in Bahasa Indonesia (and not in English) with the Indonesian counterparties to ensure that they are valid under Indonesian Law.
  5. Additionally, Indonesian parties may be able to resist any enforcement action initiated against them in Indonesia either for an arbitration award or a foreign judgment on the basis of the original contract (say Charter Party of Bill of Lading Contract) falling foul of the Indonesian Language law.
  6. We would therefore suggest that Carrier/Owners’s that if they trade to Indonesia, they seek further advice from Indonesian lawyers to ensure that their contracts remain valid in Indonesia. We believe that the easiest way to resolve this issue would be to provide an Indonesian version of the contract together with the English Version (for say all shipments being effected to and from Indonesia) and state the version (either English or Indonesian) prevailing in the event of any inconsistency.

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