Law No. 24 of 2009 on the National Flag, Language, Emblem, and Anthem (“Language Law”) regulates Bahasa Indonesia as the official language for use in both public and private sectors, including in agreements involving Indonesian individuals or entities. Article 31 paragraph (1) of the Language Law requires that such agreements be made in Bahasa Indonesia. Additionally, as an implementing regulation of the Language Law, Presidential Regulation No. 63 of 2019, particularly Article 26 paragraphs (2) and (3), allows agreements involving foreign parties to also be written in a foreign language (typically English), as a mutually understood version alongside the Indonesian version.

In response, the Supreme Court of Indonesia issued Circular Letter No. 3 of 2023 (“SEMA No. 3/2023”), which clarifies that an agreement between Indonesian and foreign parties drafted in a foreign language cannot be invalidated solely due to the lack of an Indonesian version, unless the bad faith in the making of the agreement can be proven. It can be concluded that following the issuance of SEMA No. 3/2023,

SEMA No. 3 of 2023 affirms that contracts in English involving Indonesian parties are not automatically invalid for lacking an Indonesian version-shifting the focus to parties good faith and intent rather than strict language compliance

the use of a foreign or English-only language in agreements involving Indonesian individuals or entities is no longer automatically considered as a violation of lawful cause. SEMA No. 3/2023 clearly distinguishes between a breach of the Language Law and a violation of lawful cause under Articles 1335 and 1337 of the ICC. Therefore, a failure to comply with the Language Law does not automatically render an agreement void for lack of lawful cause.

Therefore, this SEMA No.3/2023 marks a significant shift in the realm of the litigation matters in Indonesia, especially which involving the contracts in foreign languages only, where its emphasized that the courts must consider the intention between the parties, as well as the agreement’s substance, rather than nullifying contracts purely on the linguistic grounds. While bilingual agreements (Bahasa Indonesia and a foreign language) remain the safest and most ideal format for cross-border agreements which involving Indonesian individuals or entities, SEMA No. 3/2023 allows the use of English only agreements, provided that the agreement is made in good intention. Further, to minimize the legal risks, both parties should be given sufficient opportunity to review, understand and negotiate the terms of the agreement by the written correspondences, where it can express the good intention between the parties before entering the agreements and further help avoid the future disputes or claims upon the agreements.