CONTRACT/AGREEMENT IN ACADEMIC DRAFT AND BILL OF INDONESIAN PRIVATE INTERNATIONAL LAW

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“a comparison with article 16, 17, and article 18 of algmeene bepalingen van wetgeving voor nederlands indie (ab) staatsblad 1847 no 23 of 1847”

If we look at the capital investment dispute between the Government of Indonesia c.q. Indonesia Investment Coordinating Board (BKPM) against Amco Asia and Amco Indonesia during 1980, in which the main point of dispute is the revocation of an Investment License that has already given for 30 years period.  However, the BKPM revoked the Investment License in the 9th year, under the reason that Amco Indonesia as the Kartika Plaza Hotel management has conducted a miss-management and committed a fraudulent act that caused the Indonesia party does not have any portion of shares.  There are some issues arising in the dispute regarding the dispute settlement forum and the intervention by the Government of Indonesia in the dispute between the local partner and the foreign investors.

Furthermore, the Indonesian party in this dispute is inconsistent in choosing the dispute settlement forum.  Wisma Kartika as the Indonesian party was filing a claim against Amco Indonesia in the Central Jakarta District Court, even though it was already been agreed in the agreement that ICSID shall be the forum to resolve any arising dispute.  We consider this as an interesting matter, particularly regarding the direct intervention by the government in the private sector which has no any direct interest whatsoever with the state affairs.

Considering the choice of law and the dispute settlement forum are already being expressed in the agreement, hence the parties must be subject to the agreed forum.  This is based on the generally accepted principle where such agreement is a law binding on the parties to it.

In reference to the Private International Law, i.e: Article 16, Article 17, and Article 18 of Algemeene Bepalingen van Wetgeving voor Nederlands Indie (AB) Staatsblad 1847 No 23 of 1847, it does not expressly imply that the contractual law between nationals is the law that had been chosen and agreed between the parties in the agreement/contract.  This is an open gap for any party to disregard the choice of law and dispute resolutions forum that has been agreed by the parties in a contract.

If we look again in the case of Wisma Kartika vs. Amco Indonesia, the case has been brought before of Indonesian court and the court itself is accepting the case.  This will create a negative image of the law of Indonesia and decrease the trust of foreign nationals towards the law of Indonesia.

As the above case and any other cases of Private International Law in Indonesia, we see that Article 16, Article 17, and Article 18 of Algemeene Bepalingen van Wetgeving voor Nederlands Indie (AB) Staatsblad 1847 No 23 of 1847 need to be revoked and replaced with the new Private International Law that is fit with the requirements and demand of this era.

We can see a glimpse of willing in fulfilling such demands from the academic draft/Indonesian bill of Private International Law, whereas it stipulates that it is the discretion of the parties to choose any law in regards to the settlement of dispute in an agreement between the parties with different nationality (Indonesian Citizen and Foreign Nationals).  The bill of Private International Law expressed that any agreement that is containing foreign elements shall be subject to the law chosen by the parties, whether it is being stated expressly or implied.  The parties’ freedom in making choice of law is adopted in the International Contract, as long it is not in contravention of the public order principle.

Thus, if a choice of law has not been determined by the parties, the prevailing law will be the law where a party that is doing the most characteristically performance is residing or domiciled.

The application of the interpretations of the most characteristically performing party is as follows:

  1. Sales and purchase agreement and the handover of the movable goods is regulated by the law of the state where the seller party or the delivery party is residing;
  2. Company’s agreement, agreement in granting a power of attorney, representative agreement or agency agreement, commission agreement, transportation agreement, forwarder agreement, consignment agreement and storing agreement are regulated based on the law of the state where the entrepreneurs, the authorized party, the representing or the agent party, the commissioner, transportation broker, forwarder and storage receiver are staying in a place as daily residences at the time when the execution of the agreement takes place;
  3. For insurance agreement, the law to be used in the state where the insurance company is being domiciled at the time when the execution of the agreement takes place;
  4. For the agreement in which the issuance is using the law of the state where the issuing party is domiciled at the time when execution of such agreement takes place.
  5. For the agreement that has been executed in the company’s course of business, and takes place in the place of domicile of the legal entity or domicile of the person who is a party into, then the prevailing law is the law of the state where the company is domiciled; and
  6. For the agreement in the stock market, the prevailing law shall be the law where such stock market is being executed.  This provision also applies to the agreement that takes place in the general market.

The provision concerning the choice of law is made or chosen by the parties whether expressly or implied, shall not in contravention of the non-waive able regulations (mandatory), due to its social economic functionality to support national development, e.g: foreign exchange regulations, import-export quotas, labor, etc.
Hence, we can see the content in the academic draft and bill of Indonesian Private International Law is mainly concerning the choice of law in a contract or agreement.

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