INTERNATIONAL CONTRACT by TM Luthfi Yazid

DRAFTING April 2018, Jakarta

BASIC PRINCIPLES OF AGREEMENT
Article 1320 of Indonesian Civil Code
Anatomy of an agreement
Standard clauses of agreements
Non-Disclosure Agreement
ARTICLE 1320 OF INDONESIAN CIVIL
CODE
The requirement of a valid agreement
­ The agreement is made by capable parties (21 years of age, not under duress, etc.).
­ There is an agreement between the parties.
­ The agreement is about a certain object.
­ The certain object being agreed on is not unlawful.
 ANATOMY OF AN AGREEMENT
Title/name of the agreement • Notification
• Force majeure
Date and place of the agreement • Term and termination of
Identities of the parties agreement
▫ Waiver of Article 1266 of
Recital/background of the agreement Indonesian Civil Code
• Choice of law and settlement
Definition of terms in the agreement dispute
(optional) • General provisions
▫ Entire agreement
Rights and obligations of the parties ▫ Non-transfer
Representation and warranty ▫ Prevailing language
▫ Non-waiver
Indemnity ▫ Severability
▫ Confidentiality
• Signatures
IDENTITIES OF THE PARTIES
Based on the UU No. 40 year 2007 on limited liabilities company, only Director
who can represent the company. However, please note, some of the company’s
Articles of Association and/or Joint Venture Agreement, only give such authority to
the President Director. In this matter, it is advisable to check the AoA and JVA to
ensure the authorized party than can represent the company.
It is also be noted that under UU No. 40 year 2007, certain transaction need GMS
approval. Further, AoA and JVA may also have certain transaction that needs GMS
approval beside the requirement that mentioned under regulation.
In the International contract, it is difficult to decide the authorized person for
agreement signing. For example, in Japan, not all Director can sign the agreement
and only representative director can sign document on behalf of the company.
Therefore, the concerned party needs to show the evidence and ensure the
eligibility that he/she is the authorized person under their country origin regulation.
RECITAL/BACKGROUND OF THE AGREEMENT

This matter is important to explain the background of the agreement,

moreover if the agreement is the implementation of another
agreement or the amendment of the main agreement.
DEFINITION OF TERMS IN THE AGREEMENT
(OPTIONAL)

For the international transaction agreement, definition of terms can be

very important. We note some terms have different meaning in the
other countries. This definition can help to mitigate the risk of
misunderstanding on the legal and business terms. This point can also
help the parties to define the technical problem for example the
definition of calendar day, holiday, time zone, etc.
RIGHTS AND OBLIGATIONS OF THE PARTIES

It depends on the concerned parties’ business. Please note, certain

business area should be in accordance with the prevailing regulation,
for example, Distribution regulation, Outsourcing regulation, Non-
Competition Law, etc.
REPRESENTATION AND WARRANTY

A representation is an assertion as to a fact, true on the date

the representation is made, that is given to induce another party to
enter into a contract or take some other action. A warranty is a
promise of non-indemnity if the assertion is false.
INDEMNITY

“Any circumstance arises due to negligence or unlawful actfrom a Party

shall be at its own responsibilities and such Party shall indemnify and
hold harmless the other Party from and against any loss, liabilities,
claims, suits or court dispute (including all cost and expenses) relating to
the Agreement and its implementation. “
Notification
“All notices, demands or other communications required or permitted to
be given or made under this Agreement shall be in writing and delivered
personally or sent by prepaid registered post or fax addressed to the
intended recipient thereof at the address or fax number set out below
(or to such other address or fax number as either party may from time
to time notify the other party). Any such notice, demand or
communication shall be deemed to have been duly served (if delivered
personally or given or made by fax) immediately or (if given or made
by letter) seven days after posting.”
FORCE MAJEURE

“Force Majeure shall mean any event or circumstances beyond the

reasonable control of the Parties, which caused either Party unable to
perform its obligations under the Agreement, including but not limited to
Acts of Gods, war, sabotage, riots, civil commotion, insurrections, strike,
lockout or other industrial disturbance, epidemic, fire, accident,
explosion, government actions or expropriation.”
“The rights and obligations of the Parties are waived for a temporary
period and the Parties shall take any necessary action within 7 (seven)
Working Days after Force Majeure occurs to perform their delayed
obligations. “
TERM AND TERMINATION OF AGREEMENT

“For termination of the Agreement, the Parties agree to waive

Articles 1266 of the Civil Code (Kitab Undang-undang Hukum Perdata)
and the Agreement shall be terminated with a written notice from either
Party. “
CHOICE OF LAW AND SETTLEMENT DISPUTE

“The Agreement shall be construed and governed in accordance with laws of

the Republic of Indonesia.”
“Any dispute arising out of the Agreement that cannot be settled amicably
by the Parties within 30 (thirty) calendar days, shall be submitted to the
Central Jakarta District Court in Jakarta. “
Or
“Any dispute, controversy or claim arising out of, relating to or in connection
with this Agreement including any question regarding their respective
existence, validity or termination, shall be referred to and finally resolved by
arbitration in Jakarta in accordance with the Arbitration Rules of the
Indonesia National Board of Arbitration (“BANI”) for the time being in
force, which rules are deemed to be incorporated by reference into this
clause. The language of the arbitration shall be English. The number of
arbitrator shall be one, to be appointed by the Chairman of the BANI. ”
 GENERAL PROVISIONS

Entire agreement
Example: “This Agreement contains the entire Agreement between the
parties with respect to the subject matter of this Agreement, supersedes all
previous agreements and understandings between the Parties with respect to
this Agreement or any matter referred herein, and may not be modified
except by consent in writing signed by the duly authorised representatives of
the parties. Notwithstanding any provisions to the contrary, any previous
agreements between the Distributor and [*] with respect to the subject
matter of this Agreement shall also immediately terminate and forthwith be
superseded upon the execution of this Agreement.”
Non-transfer
Example: “The Parties ensures that it is not entitled to assign a part of or the
entire of the Agreement to any third party without a prior written consent
each Party. “
Prevailing language
“The Agreement is provided in 2 (two) languages which are Indonesian
and English languages each of which shall have the same meaning, in
case of disputes between two languages then the Indonesian language
version shall prevail.”

Non-waiver
“No failure to exercise and no delay in exercising on the part of [*] any
right or remedy under this Agreement shall operate as a waiver thereof
nor shall any single or partial exercise of any right or remedy preclude
any other or further exercise thereof or the exercise of any other rights
or remedies.”
Severability
“If any terms in the Agreement shall be invalid or unenforceable in any
respect under any applicable laws, the remaining terms herein shall remain in
full force and effect and shall not be affected or impaired in any way.”

Confidentiality
“The content of this Agreement and all information disclosed by the each
party in connection with this Agreement including but not limited to
documents to be examined and any other information received by either
parties related to the implementation of this Agreement. The Parties must not
directly or indirectly disclose or divulge this information to third parties
(excluding the group companies of the parties, attorneys, certified public
accountants, other professionals, and the public authorities who hold the
power to demand disclosure under laws and regulations), and must not use
this information for purposes of than this Agreement.”
SIGNATURES

Signature is the evidence of the concerned parties have agreed with the
said agreement.
Stamp duty
Based on the Regulation No. 13 year 1985 on Stamp Duty, the agreement
is one the documents that shall have a stamp duty. Further, the article 7 of
this regulation said that the stamp duty should be added in the signing
part and mention the date with the same ink of the signature and some
part of the signature should across the stamp duty.
Legalization
There is a possibility that the party will sign the agreement outside
Indonesia Jurisdiction. Based on Attachment of Ministry of Foreign Affair
Regulation No. 09/AKP/XII/2006, such agreement should be legalized
through Notary or related Ministry of the concerned country and Indonesia
Embassy in the concerned country.
NON-DISCLOSURE AGREEMENT
In certain cases, the parties prepare the specific Non Disclosure
Agreement, which include this following point:
•Determine the disclosing and receiving parties.
•Determine the permitted purpose of disclosure.
•Covenants of confidentiality, including what kind of information is
confidential, how to keep it confidential, how to mitigate unintended
disclosure, who must keep it confidential, etc.
•Exception, in what kind of situation the information is not considered as
confidential.
•Return of information and property.
•Indemnity in the event of illegal disclosure of information.
ISSUES
Indonesia language
Based on the UU No. 24 year 2009, the agreement shall be in Indonesia language.
Accordingly, parties shall also execute the Indonesia version of the agreement.
Further, if an agreement is made in two languages, the parties may choose its
prevailing language. For example, an agreement is made in English language and
Bahasa Indonesia language, because the parties negotiate it in English language,
therefore, the parties decided that the English language version is prevail in case there
is discrepancy in its interpretation between English language and Bahasa Indonesia
language.
However, please note that some Indonesian regulations require Bahasa Indonesia as the
prevailing language in case an agreement is made in two languages. For example, Law
No.2 Year 2017 on Construction, article 50 of this regulation requires such matter.

Rupiah Utilization
Based on the UU No. 7 year 2011, any transaction within Indonesia jurisdiction shall
only use Rupiah, except the exemption condition that listed in this regulation.