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News Article.
Implications of the New Regulation on the Mandatory Use of Indonesian Language to Businesses
Indonesia
20 Dec 2019
Implications of the New Regulation on the Mandatory Use of Indonesian Language to Businesses

In legal terms, the mandatory use of the Indonesian language is stipulated under Law Number 24 of 2009 on The Flag, the Language, the Emblem and the Anthem (“Law 24/2009”), which is passed for the purpose of preserving the Indonesian language, among other national symbols. In accordance with the hierarchy of Indonesian regulations, Law 24/2009 is a superior regulation, which requires an implementing regulation. In that regard, former Indonesian President Susilo Bambang Yudhoyono issued Presidential Regulation Number 16 of 2010 regarding the Use of the Indonesian Language for Official Speeches of the President and/or Vice President as well as other Government Officials (“Regulation 16/2010”). However, the scope of Regulation 16/2010 is very limited and did not contain any other provision on the use of the Indonesian Language within the broader context set upon by Law 24/2009.

In an attempt to cover that broader context, the current Indonesian President Joko Widodo recently issued a new regulation, namely Presidential Regulation Number 63 of 2019 concerning the Use of the Indonesian Language (“Regulation 63/2019”). The issuance of this regulation effectively revokes Regulation 16/2010.

These following business practices are affected by Regulation 63/2019:

  1. Memorandum of Understanding and Agreement

    On matters involving one or more Foreign Parties and/or Foreign Elements, we are of the opinion that both Indonesian and the English or the relevant language of the Foreign Parties and/or Foreign Elements must be made available at the time of signing. It should be noted that the foreign language must be an equivalent translation of the Indonesian Language and not the other way around to ensure that all Parties involved have an equal comprehension of the Memorandum of Understanding or Agreement.

    In the event of a difference in interpretation, then the language used shall be the one that is agreed upon by the Parties involved. This is based on the Principle of Freedom of Contract as referred in Article 1338 of the Indonesian Civil Code. Therefore, it is highly important to include clauses addressing the Governing Language and the Choice of Law in the Memorandum of Understanding or Agreement to avoid disputes at a later time.
     
  2. Company Organs

    In matter involving one or more Foreign Parties and/or Foreign Elements in Company Organs (defined within article 1 paragraph 2 of Law Number 40 of 2007 on Limited Liability Companies as the General Meeting of Shareholders, Board of Directors and Board of Commissioners), our opinion is that any document of Annual General Meeting of Shareholder (“AGMS”), Extraordinary General Meeting of Shareholder (“EGMS”) and Circular Resolution must also be made available in Indonesian and in English or in the relevant language of the Foreign Parties and/or Foreign Elements.
     
  3. Financial Documents

    The issuance of Regulation 63/2019 also affects all financial documents involving one or more Foreign Parties and/or Foreign Elements. Therefore, any financial documents to be made, such as invoices, require a bilingual version in both Indonesian as well as English or the relevant language of the Foreign Party and/or Foreign Element.

In conclusion, the law is another effort from the Indonesian government in reinforcing the national identity and aiming to maintain the nation's sovereignty as such mandated in the 1945 Constitution of the State of Indonesia.

Interested to know more?
Please contact:
Ms. Cassandra Stephanie: cassandra@ekonid.id
Ms. Indah Lestari: indah@ekonid.id

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