The Bill on International Private Law Establishes a New Legal Framework for Cross-Border Private Law Relations in Indonesia

Introduction

The Government and the House of Representatives have drafted the Bill on International Private Law (Rancangan Undang-Undang tentang Hukum Perdata Internasional) ("IPL Bill"). The IPL Bill governs civil relations involving foreign elements (cross-border) within the jurisdiction of the Republic of Indonesia. Previously, provisions on international private law in Indonesia were set forth in various laws and regulations. As cross-border economic, social, and cultural activities continue to increase, this situation creates the need for a more systematic and integrated regulatory framework to address the resolution of cross-border civil cases in Indonesia.

Comparison

The IPL Bill repeals or invalidates several provisions that previously served as references for international private law in Indonesia, namely:

1. Article 16, Article 17, and Article 18 of the General Provisions on Legislation for Indonesia (Peraturan Umum mengenai Perundang-undangan untuk Indonesia) (Algemeene Bepalingen van Wetgeving, Staatsblad 1847:23);

2. Article 100 and Article 436 of the Civil Procedure Regulation (Reglemen Acara Perdata) (Reglement op de Burgerlijke Rechtsvordering voor de Raden van Justitie op Java en het Hoog-Geregtshof van Nederlandsch-Indië, Staatsblad 1847:52 in conjunction with Staatsblad 1849:63); and

3. Provisions regarding other institutions acting as supervisory guardians for the best interests of the child as stipulated in Article 35 paragraph (1) and paragraph (2) of Law Number 23 of 2002 on Child Protection as amended by Law Number 35 of 2014 on the Amendment to Law Number 23 of 2002 on Child Protection, which do not apply to children from marriages involving foreign elements or of foreign descent.

These significant changes are presented in the following comparison table between the previous and new provisions:

Key Provisions

Scope of Application and Refusal of Foreign Law

Article 2 stipulates that the IPL Bill applies to the determination of the international jurisdiction of Indonesian Courts, the determination of the applicable law in civil relations containing foreign elements, as well as the recognition and execution of foreign court or international arbitration judgments. Article 4 allows Indonesian Courts to apply legal principles and/or international customs if there is no legal provision to resolve the case at hand. Furthermore, Article 5 grants Indonesian Courts the authority to refuse to apply or recognize foreign legal rules, rights arising under foreign law, as well as foreign court judgments and international arbitration awards if they conflict with Mandatory Legal Rules, morality, or public order.

Personal Status of Individuals and Legal Capacity

Article 13 stipulates that a person's personal status is determined based on their national law using the principle of nationality. If a person holds dual citizenship and one of which is Indonesian citizenship, Article 14 paragraph (2) requires the person to comply with Indonesian Law. Regarding the capacity to perform legal acts over property, Article 18 governs that the authority to perform legal acts over immovable property follows the law of the place where the property is located, whereas for movable property, it follows the law applicable to the personal status of the person concerned.

Legal Status of Associations and Foreign Business Entities

The IPL Bill recognizes associations or business entities as legal subjects with independent rights, obligations, and responsibilities. The nationality and personal status of a business entity are determined based on the law of the place where the association is established or domiciled, as stipulated in Article 20. In addition, associations established outside the territory of the Republic of Indonesia but conducting activities in Indonesia remain subject to Indonesian Law, as emphasized in Article 20 paragraph (3).

Family Law, Property, and Child Adoption

Marriages involving foreign elements are recognized as valid if they meet the material requirements based on the personal status law of each party and the formal requirements based on the law of the place where the marriage is solemnized, as stipulated in Article 21. In the event the parties have different nationalities, the settlement of marital property follows the law of their shared daily residence, unless the parties enter into a prenuptial agreement, as stipulated in Article 22. Meanwhile, cross-border guardianship, custody, and child adoption must prioritize the best interests of the child and follow the law of the child's personal status, as stipulated in Article 32, Article 33, and Article 35.

Property Status, Property Rights, and Inheritance

The status, classification, rights, and obligations over a property are generally determined based on the law of the place where the property is located, as stipulated in Article 37. However, there is an important exception set forth in Article 38, which stipulates that the status and classification of registered property are determined by the law of the place where the property is registered, whereas Article 39 governs that unregistered movable property is subject to the law applicable to the personal status of the owner or possessor of the property. In the event of a transfer of property rights through inheritance, inheritance due to death follows the law applicable to the personal status of the deceased at the time of death, as stipulated in Article 42. Meanwhile, Article 43 emphasizes that inheritance through a will must meet the material requirements based on the personal status of the testator at the time the will is drawn up, as well as the formal requirements based on the law of the place where the will is drawn up.

International Agreements and Electronic Transactions

Commercial agreements are subject to the law explicitly chosen and agreed upon by the parties, as stipulated in Article 47. If the parties do not determine a choice of law, the contract is governed by the law of the place with the closest connection to the agreement, as stipulated in Article 52. In electronic transactions, the law unilaterally determined by one of the parties in the formation of the transaction remains recognized as long as it does not conflict with Mandatory Legal Rules, as stipulated in Article 54. If these provisions are not fulfilled, the legal consequences of the electronic transaction follow Indonesian Law, as stipulated in Article 55.

Unlawful Acts

In claims for damages, the determination of whether an event constitutes an unlawful act and its legal consequences is governed by the law of the place where the event occurred, as stipulated in Article 57. The parties may also agree to apply another law before a lawsuit is filed with the court, as stipulated in Article 58.

International Jurisdiction and Arbitration Clauses

Indonesian Courts have international jurisdiction to adjudicate cross-border civil disputes under several conditions as stipulated in Article 59, including where:

1. The defendant is an Indonesian citizen or resides in Indonesia;

2. The defendant has a place of business or conducts commercial activities within the territory of Indonesia;

3. The object of the dispute is located or registered in Indonesia; or

4. The place of performance of the agreement or the place where the unlawful act occurred is in Indonesia.

Indonesian Courts may also refuse to adjudicate a case if the parties are bound by a valid arbitration agreement, as stipulated in Article 60 letter (b). However, the court may still examine the case if the defendant proceeds with the trial process without raising an objection to the arbitration clause, the arbitration agreement is declared null and void, or the arbitration forum cannot be established due to the defendant's negligence, as stipulated in Article 61.

Recognition and Execution of Foreign Court Judgments

In principle, foreign court judgments can be recognized in Indonesia as stipulated in Article 64. The execution of a judgment containing a penalty against one of the parties can only be carried out if there is a reciprocal international agreement between Indonesia and the state that issued the judgment, as stipulated in Article 65 paragraph (1). To execute such a judgment, the applicant must file a request for an exequatur to the Supreme Court, and the Supreme Court has the authority to issue the exequatur without re-examining the merits of the case, as stipulated in Article 65 paragraph (4) and paragraph (5).

Closing

The IPL Bill establishes a national legal framework governing civil relations containing foreign elements in Indonesia while simultaneously repealing several provisions that previously served as practical references. These provisions stipulate, among others, that a person's personal status is determined based on their national law, the status and rights over property are determined specifically according to its classification (based on the location of the property, place of registration, or the personal status of the owner), and associations or business entities established abroad but conducting activities in Indonesia remain subject to Indonesian Law. The IPL Bill also governs various aspects of cross-border civil relations, including marriages involving foreign elements, marital property, guardianship and child adoption, inheritance, international agreements and electronic transactions, as well as unlawful acts. Furthermore, the IPL Bill establishes the jurisdictional basis for Indonesian Courts in adjudicating cross-border civil disputes, including conditions under which the court may refuse or proceed to examine a case related to an arbitration agreement. Regarding the execution of judgments, the IPL Bill introduces a mechanism for the recognition and execution of foreign court judgments through an exequatur request to the Supreme Court by observing the principle of reciprocity. Through these provisions, the IPL Bill provides a clearer basis for determining the applicable law, court authority, and recognition of judgments in civil cases involving cross-border elements in Indonesia.