In addition, PR 63 expressly confirms that the parties to a memorandum of understanding and/or an agreement involving foreign parties have the possibility to agree on the relevant language that would prevail in the event of disagreement between the language versions. The regulation stipulates that the mother tongue of the foreign party and/or the English language is used as an equivalent or translation of the Indonesian version. A strict interpretation of the relevant provision of the Regulation would mean that an Indonesian version of the agreement must first be drawn up, followed by a non-Indonesian or English version of the agreement. In practice, this would not be practical, given that negotiations often take place in English and usually with last-minute changes to an agreement. PR 63 attempts to clarify an appropriate market practice by finding that in the event of a difference of interpretation, the parties may agree on the dominant language. However, some issues are not yet clear, including the extent to which the dominant language clause can be dropped in an agreement and whether a foreign-owned enterprise (LDC) is considered an Indonesian or foreign party. Comment from Assegaf Hamzah & Partners, a member company of Rajah & Tann Asia: Although the regulation provides some clarity regarding the mandatory use of the Indonesian language, it does not take into account the now widely accepted market practice developed over the ten-year period. The new regulation would recommend that companies prepare and execute the Indonesian version of their agreements at the same time as the current English version. Therefore, companies should consider the time and resources required to prepare the Indonesian version before closing a transaction.
Before pr 63, where the Indonesian and foreign versions could not be signed simultaneously, it was customary for the agreement to be concluded initially in the foreign language. The Indonesian version would then be prepared and signed within an agreed time frame. Through this practical approach, the parties have taken the risk that the validity of the foreign language version (especially if the agreement is governed by Indonesian law) may be challenged between the signature of the language version and the Indonesian version. . . .