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Prevailing language in Indonesian contracts clarified under new presidential regulation

On 30 September 2019, President Joko Widodo signed the long-awaited implementing regulation to Law No. 24 of 2009 on National Flag, Language, Coat of Arms and Anthem (commonly known as the “Language Law”) – Presidential Regulation No. 63 of 2019 on the Use of the Indonesian Language.

The new presidential regulation states that in case of inconsistency between the Indonesian and foreign language versions of a contract‎ involving an Indonesian party, the prevailing language will be the language agreed between the parties to the contract.

This is a welcome clarification that confirms current commercial practice widely adopted in agreements between Indonesian and foreign parties. Although not expressly stated, it appears that the new presidential regulation is based on the premise that all contracts (within the jurisdiction of the Indonesian courts or subject to the application of Indonesian law) involving Indonesian parties must include a Bahasa Indonesia version, regardless of the governing law of such contract – at least, that would be the most prudent approach to take. However, the timing for signing the Bahasa Indonesia version remains unclear. 

"Official state documents” must be in Bahasa Indonesia but may be accompanied by a foreign language translation. Precisely what constitutes an official state document (e.g., documents in notarial deed form) may be subject to further interpretation. In the event of a difference in interpretation between versions of official state documents, the new presidential regulation also suggests that the Indonesian version shall be the "main reference".

A more detailed update will follow.