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Tuesday, January 22, 2013

Continued contract uncertainty in Indonesia

New Indonesian rules called Implementation of Systems for Electronic Transactions (PP. 82 of 2012) came into effect in October 2012. One key provision is the requirement that electronic contracts be in Indonesian language if they are addressed to residents of Indonesia.

This rule follows a similar one in Law no. 24 of 2009 on the Flag, Language, State Emblems and Anthem. Article 31 paragraph (1) says "Indonesian Language shall be used in any memorandum of understanding or agreement involving state institutions, government agencies of the Republic of Indonesia, Indonesian private institutions or individual citizens of Indonesia".

This caused a great deal of debate. It is not clear whether a contract not in Bahasa Indonesia language is invalid as no penalties and legal consequences were specified (and again none are in the new rules). It is problematic for regular contracts which can frequently involve foreign parties, but electronic transactions do not observe national boundaries at all. Observers accept that this is hard for businesses based outside Indonesia to comply with.

A second issue in the electronic transactions rules is the meaning of 'addressed to the population of Indonesia'. Trade through cyberspace is usually not directed to residents of particular countries. It is presumably intended to catch transactions carried out in Indonesia but again many are cross border.

While one can appreciate the government's idea to protect consumers from possible fraud through electronic transactions it is not conducive to legal certainty to leave contracts unclear. Perhaps further ministerial regulations will help. Meanwhile for safety all contracts should be bilingual.  

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