Legal Agreement in Indonesia Gets Lost in Translation

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Legal Agreement in Indonesia Gets Lost in Translation

If you have plans to expand your business into the Indonesian market, you might want to read this article. Recently, a court in the country ruled that a contract drawn up in the English language was invalid, leaving an American company crying over lost revenue.

In an article by Out-Law.com, we were informed that Legal500 recently reported that a loan agreement between a US-based lender and an Indonesian company was deemed void by a district court in the nation’s capital city of Jakarta.

The reason for this?

:: The contract was written in English which is not in line with the Indonesian law, in which it is stated that contracts must be drafted in the local language, Bahasa Indonesia.

This verdict was quite surprising: Conventus Law reported that the Indonesian government earlier stated that contracts written in English, or drawn up in both English and Bahasa Indonesia where the English version was binding, should be regarded as legal as well.

However, the court rejected this statement and ruled that the agreement between the US and Indonesian companies was invalid as it was not drawn up in Bahasa Indonesia. The verdict means that the loan repayments the US lender claims the Indonesian company still owes them cannot be retrieved.

Kate Terry, who is a project lawyer for the law firm behind Out-Law.com, Pinsent Masons, says this incidence should be a warning for foreign companies that have English-drafted contracts with local companies should.

Now that one court has more or less revived the old law, chances are more Indonesian courts will do the same to keep foreign companies from claiming money from Indonesian-based businesses.

So, next time you’re thinking about doing business in Indonesia, remember to think about Indonesian language translations for all your legal agreements and documents.

Katia Reed
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