In cross-border legal relations, whether in commerce, government, academia, or social cooperation, the use of foreign languages in contracts is a common practice. English is the most widely used, functioning as a global lingua franca. However, other languages such as Mandarin, Japanese, or Arabic are also used depending on the parties involved.
In Indonesia, foreign-language contracts are not only found in international business cooperation but also in bilateral or multilateral agreements involving the government, employment contracts with foreign companies, and even grant or aid agreements. This raises a fundamental legal question: what is the status of contracts drafted solely in a foreign language under Indonesian law?
Applicable Legal Framework
Several legal instruments govern the validity of contracts and the use of language in agreements in Indonesia:
- Indonesian Civil Code (Articles 1313, 1320, and 1338), which stipulate the requirements for a valid contract.
- Law No. 24 of 2009 regarding the National Flag, Language, Emblem, and Anthem.
- Presidential Regulation No. 63 of 2019 regarding the Use of Indonesian Language.
- Supreme Court Decision No. 1572 K/Pdt/2015.
Legal Analysis
1. Validity of Contracts under the Civil Code
According to the Civil Code, a valid contract must meet four conditions: consent of the parties, legal capacity, a specific object, and a lawful cause. Notably, there is no explicit requirement that contracts must be written in Indonesian. Thus, in principle, contracts drafted in a foreign language remain valid as long as they fulfill these four conditions.
However, the validity of a contract is not solely determined by the Civil Code. Specific laws impose additional obligations regarding the mandatory use of the Indonesian language.
2. Obligation to Use Indonesian Language
Article 31 of Law No. 24/2009 and Article 26 of Presidential Regulation No. 63/2019 stipulate that contracts involving Indonesian parties must be drafted in Indonesian. When a foreign party is involved, the contract may also be prepared in the foreign party’s national language and/or in English as a parallel text.
This means that a foreign-language contract alone is insufficient. An Indonesian version must be present for the contract to have full binding legal force.
3. Supreme Court Precedent
The Supreme Court Decision No. 1572 K/Pdt/2015 (NINE AM LTD. vs. PT Bangun Karya Pratama Lestari) provides an important precedent. The Court held that a loan agreement drafted solely in English violated Law No. 24/2009 and was therefore null and void, or at the very least unenforceable. This ruling confirms that the requirement to use Indonesian in contracts involving Indonesian parties is not merely administrative but relates to the validity of the agreement itself.
Conclusion and Recommendations
From the discussion above, the following conclusions can be drawn:
- Under the Civil Code, foreign-language contracts are valid as long as they meet the general requirements of consent, capacity, object, and lawful cause.
- UU No. 24/2009 and Presidential Regulation No. 63/2019, contracts involving Indonesian parties must be drafted in Indonesian, alongside any foreign-language versions.
- The Supreme Court has reinforced this obligation by ruling that contracts written solely in English may be declared null and void.
Accordingly, the following recommendations should be considered:
- Contracts involving Indonesian parties should always be drafted bilingually (Indonesian and the foreign party’s language/English).
- A bilingual contract should specify which language version will prevail in case of discrepancies in interpretation.
- This practice not only ensures legal certainty but also minimizes potential disputes arising from differences in translation.
