Hartono Sunaryati

Setiawan

Soenandar Taryana

English

Academic Research Repository at the Institute of Developing Economies

Chapter 3 The Development of New CustomaryContract Law著者 Hartono Sunaryati, Setiawan, Soenandar Taryana権利 Copyrights 日本貿易振興機構（ジェトロ）アジア経済研究所 / Institute of DevelopingEconomies, Japan External Trade Organization(IDE-JETRO) http://www.ide.go.jpjournal orpublication titleThe Indonesian Law on Contractsvolume 10page range 21-27year 2001URL http://hdl.handle.net/2344/0001514711i!/1!iit                   Chapter 3The Development of Nevr Customary Contract Law21Since 1967 Indonesia has taken an ever increasing open door policy with regardto foreign investments and foreign trade.Since then thousands and thousands international contracts have beenconcluded, both between Indonesia private companies and foreign companies,as well as between Indonesian state companies and transnational corporations.From the beginning, foreign contract models have simply been adopted andtranslated in the Indonesiqn lariguage, without much thinking and research,whether those foreign concepts are in line with Indonesiari contract - andbusiness law, or not. On the contrary, very often the principles of Indonesiancontra¢ts law has been thwarted and re-interpreted, in order to accommodatethe foreign concepts into Indonesian larw.Through the 35 years or so of intense foreign influence, especially of Americanlaw in Indonesia, Indonesian Contract and Business Law has astrayd im fromwhat it theoretically should have been, given the fact tihat our Civi1 andCommercial Code of 1849 looks almost the same as it was some 150 years ago,except for a change of the Indonesian company law. 'Indeed, our Contract law, espeeially with regard to international contracts,mainly consists of thousands of contracts which together may be said hasbecome the source of customary law as agreed to by both Indonesiari andfereign business partners. With respect to foreigri investnients, banlcing - asweil as the capital market, government administrative regulations decide on theform of the contract and other aspects of the contracts, very often makingexceptions to the rules and principles laid down in the Civi1 Code. So that nowwe have numerous laws and regulations on specific contracts, while the Law on                                                                     22Contracts in the Civil Code of 1848 only serves as the general princtples ofContract Law in Indonesia.Credit contracts, technical assistance contracts, management contracts,investment contracts, license contracts, franchise contracts, sale of goodscontract have mostly been made along American models with a few modificationin order that the foreigri party's obligations and responsibMties are minimized,while the Inddnesian partner's obligations are maximized.The whole operation of the investment, starting frorn the land on which thefactory or business is to be established, loari and credit, operation costs,including that of raw materials and machnes, desigri and licenses, labour andmanpower problems (except for oifLshore personnel) up to negotiation - andadministration costs and taxation have been made the responsibility of the localpartner of the Joim Venture Company, whereby most of the operation costs ofthe Joint venture are the gains of the foreign partner of the Joint Venture beforeeven the profits after tax will be divided between the foreign - and the localpartner.What is more, those foreign experts, loans, raw material and machineries,designs and plans of operation, are thereby calculated twice : both as theforeign partyls investment (eajoying all kinds of tax-holidays and other facihties)as well as money and goods sold to "their own" (Joint Venture) Company inIndonesia.'Nevenheless, at that time the policy of the New Order Government under ex-President Soeharto was of the opmion that Indonesia should open our doorswidely for modernization, industrialization and foreign investments. This heavilyeconomics oriented approach intentionally disregarded al1 protests andwarnings coming from the legai professions, saying that so many of the foreigninvestment contracts were not only contrary to Indonesian (and universai}'SeealsoSusiaryatiHartono(diss):"BeberapajL`lasalt?hTivnsntzsionaldaltzmPenanamanMbtlaiAsingdiindonesia" CTransnational ftobleins ef Foreign Investments in indonesia), Binacipta, Baridmg., 1973.i1Ir1i/;i[11if:!I                                                                      23principles of Contract Law, such as violating the principles of fairness and ofbalance, which the UNIDROIT Principles expresSly states as contracts whichcan be re-negotiated, or coutd beeome in-valid.Most economist, ministers and decision-makers even arrogaritily answered that"no revolution can be made with lawyers" when lndonesian lawyers pointed outthe mistakes, iopsidedness and unfairness of the investment contracts madeand agreed by the President c.q. The' (Foreign) Irrvestment Board, especiallywhen one considers that the foreign investors are usually transnationalcorporations, while their Iocal partners consist of economically andtechnologically traditional and small local corporations, by any standard. Nowonder that in this Reforrnation Era many members of Parliament {DewanPeruJakilan Rakyae insist on having the contracts agreed by many a statecompany, such as Perusahaan Listrik Negara (llLINIX 11ertamina, and others, to becancelled or renegotiated.TheTrendAyva fromPurel CivilLawContractsIn any case, during the more than 30 years or so after 1967 i.e. when theForeign Investment Law was first promulgated, a huge number of investmentcontracts came into being, which although not completely in line with thepimciples and rules of the Indonesian Contract LasAT and Law of Obligations asregulated in the Civil Code, were more or less respected and implemented bythe govermnent, and courts and recognzed as new customary Contract Lqw.There is, howover a big difference between these investment eontracts cQmparedto the "ordinary" civi1 contra¢ts regulated by the Civi1 Code.Because the foreign investment contracts, although concluded befbre theinvestment perrnit of the {Foreigri) Investment Board, will become binding onlyafter tihe Joint Venture has obtained the necessary permit of the (Foreign)Investment Board {BKPM) andlor the relevant "dinisterial Departments.                 '1                                                                     24The civil contracts concluded before the permit is issued by the BKPM is to beregarded as binding only after and upon the condhion of the BKPM permit                                                                     'being issued.Therefbre investment contracts are not purely civi1 contracts, but are governedby a mixture of private-and public law rules.        'ln other words: eventhough each of the ¢ontracts (such as loan, sale of goods, .                                                                       'license contracts and the 1ike} would be perfectly valid when standing alone,nevertheless, as part of an investrnent contract they are subject to the publicrules of admmistrative and public policy.This also applies to real estate contracts, insurance contracts, retai1 contracts,etc., whereby foreign investors or cornpanies are involved.It is therefore tha･t a pure private law approach to contracts concluded inIndonesia is not appropriate any more, aS is the case also in other states, suchas in the United States, where each import contract should confbrm to the Foodand Drug Act first, before ariything else.The Rise of Standard Contracts and Internatienal ContraetsWith the industrialization of Indonesia and big business since the 1970sinvolving the gromh of companies and banks, the use of standard contractscame into being.Of course, before that Indonesia already made use of standard contract, suchas in transportation, banking and insurance, but it is only during the 1970sthat the use of standard contracts, especially in the bankmg, real estate andimport/export sector started to be used onabig scale. 'i::i://!il:i                                                                      2SUnfortunately the law of obligations in lndonesia has no regulations for suchstandard contract and even the judiciary has never made any differencebetween the implementation and implication of standard contracts and"ordinary" contracts, where the bargaining power of both pardes are conFideredrelatively equal.No wonder that this lack of legal sensitivity of the lawyers, and especially of thecourts lead to unjust decisio'ns and ajustice, because they disregarded theprinciples of balance and equality as a factor which could decide on wheiher acontract is valid and fair, or not. What was important to the govemment andthe judges was only that the contract was signed, rnaking the contracts ipsofacto valid. The fact that big companies could impose almost everytihing to weakparties for whom the contracts could be a matter of life ad death, therebyexcluclmg most responsibblties for themselves, while imposing al1 kinds ofobligations to the weaker party, were simply out of their considerations.In the near future, therefore Indonesia would have to introduce a Law onStandard Contracts, like' tihe regulation on General Standards (A(gemeneVborwaarden) in the Netherlands where the differences of bargaining powerbetween the parties wi11 be considered and the consequences are regulated, inorder to come to fairer ai rangements.The Need fbr a Law on International or Transnational ContraetsLike a Law in Standard Contracts, we also need a Law on InternationalContracts, where the international conflict laws and p:inciples are explicitlyspelled out.Because at present no important industrial or business operation is any moreconducted witihout foreigr1 credit, foreign management, foreign technology,foreign imported raw materials and what not, or even without the products orservices being exported al)road.                 '                                                                     26                                      'Business in Indonesia therefbre, is not any more conducted internally betrweenIndonesians, but almost always involves one or more fbreign parties orelements. Only very small businesses are conducted between Indonesians,making Indonesia a part of the giobal market in the real sense of the word.The view as if international contracts are only exceptions to the rule therefore iscontrary to what we see in practice, ai least in Jakarta.Irrvolvement of international trade and business organizations, even the IMF,IFC, the World Bank, the Asian Development Bank and UNDP, which are thechanrtels for (business) dovelopment in Indonesia, all these organizations thinkin terrns of international law and International contracts and agreements, towhich the Indonesian govemnent and the Indonesian people haye to live by.A separate law on International Contracts seems therefore aiso necessary,especially because with international contracts in Indonesia not only privateinternational law applies, but also inteniational conventions and treaties, suchas the International Convention on the Settlement of Investment Disputes, etc.Hence, more appropriate wouid be the notion of transnational contracts sinceboth public and prtvate international law rules and principles wi1! have to beconsidered, when making and interpreting international or transnationalcontracts in Indonesia.The Law on Government ContractsA fumher category of newly grown contracts after the 1970s are the governmentcontracts, i.e. standard Contract concluded with government agencies or witinstate companles./i1!l/L                                                                     27Although such instruments are called contracts, they have but little to do withcontracts properly so called. In fact they rather represent a list of conditionstipulated by the goverrment agency or the state company to which the prIvateparty i.e. an Indonesian (or foreign company) has to abide by. Such govemmentcontracts are therefore Standard Contracts for which. public law is applicable.Up to the present time considerations of fairness are stil1 umecognized, such asfor instance that eventhough it lies in the power of the govemment to raise theprices of goods and services in general (which are relevant to ihe contract),nevenheless the private contractor is not allowed to make changes in the priceor thetirne of perfbrmance or the quality of the wotk. This of course is theory.In fact, often it would be impossible to abide by the conditions agreed, butsome of bribe wil1 be enough to have the performance of the contracts agreed bythe respective govemmental agency or state company, modbied.Therefore, instead of this Megal way of doing business I would prefer torecognize the principles of force majeUre, of balance and of hardship to berecognized as factors or reasons for renegotiation, as regulated by theUNIDROIT Principles of International Cornmercial Contracts.:!!1ifE1

Chapter 3 The Development of New Customary Contract Law

https://ir.ide.go.jp/?action=repository_action_common_download&item_id=33092&item_no=1&attribute_id=22&file_no=1

Chapter 3 The Development of New Customary Contract Law

Abstract

Similar works

Full text

Available Versions

Academic Research Repository at the Institute of Developing Economies