Indonesia: Law 24 Language Requirement Impacts Franchisors

Since Indonesia continues to be a popular market for franchises due to high demand, it is important that franchisors to remember Indonesian Law Number 24 of 2009 on Flag, Language, State Symbol and also National Anthem (“Law 24”) when drafting any type of contractual agreement, including franchise agreements.

 

Article 31 of Law 24 states that Indonesian language must be used in any memorandums of understanding or contractual agreements involving state institutions, Indonesia government agencies, Indonesian private institutions or individual Indonesian citizens.  One legal bulletin suggests that, for agreements entered into between an Indonesian party and a foreign party, the parties draw up commercial and financing agreements in dual languages: the foreign language version and an Indonesia language version. Accordingly, in the context of the franchise agreement and related documents, Law 24 appears to provide that if the agreement is written in a foreign language, an Indonesian translation has to be provided.

 

Commentary on Law 24 indicates that there is still a lot of confusion and concern about its depth and breadth. For example, there are currently no provisions regarding penalties or sanctions for failing to comply with the law.  Additionally, Law 24 is silent on the issue of language of contractual interpretation.  Moreover, it is currently unclear whether the implementing regulations of Law 24 have been issued.  Law 24 required the Indonesian government to issue these regulations by July 9, 2011.

 

As one can imagine, translating franchise agreements and their accompanying agreements into the Indonesian language can be very costly.   Observers look forward to the implementing regulations to place some context and clarity on the full scope of Law 24.

 

Click here to read AsiaLaw article on Law 24.

 

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