How a Seemingly Unimportant Omission Can Lead to Disputes on the Validity of a Notarial Deed
Have you ever experienced a case where your company deals with another party in a transaction which is required by the Indonesian law to be made in a notarial deed, such as a fiduciary security (jaminan fidusia) deed or land mortgage (hak tanggungan) deed? If so, you may need to understand in more detail the procedures for signing a notarial deed so as to avoid any unnecessary mistakes that might jeopardize your transaction.
If any claim is lodged asking for annulment of a notarial deed due to procedural failures during the making of the notarial deed, the judges may decide to accept or reject the claim. If the judges render a decision in favour of the plaintiff, the notarial deed will no longer be a formal notarial deed, and therefore the deed will become a privately made agreement. In this regard, reference is made to Article 1869 of the Indonesian Civil Code, which states that:
"A deed which, due to the official's lack of competence or capability or due to a legal defect in its drafting, cannot be treated as an authentic deed shall have the force of a private document when executed by the parties."
Here are some of noteworthy procedural tips and cases you may find useful:
If a notarial deed is made in the Indonesian language, you should make sure that all of the signatories understand the Indonesian language well. If any of them has no language ability in Indonesian, the notary should translate the whole content of the agreement into the mother language of each signing party who does not understand the Indonesian language. The responsibility of the notary to read the translation can be seen from the following:
Article 43 of Law No. 30 of 2004 concerning The Office of Notary as amended by Law No. 2 of 2014 ("Notary Law"):
"If the appearer does not understand the language used in the Deed, the Notary must translate or explain the content of the Deed in a language that the appearer understands."
We know of a case where a signatory from the counterparty claimed that he did not understand Indonesian language at all and the appointed notary did not provide him with a translation of the agreement in full, but only in summary. For that reason, he sued for the annulment of the deed as the deed was not made in accordance with the Indonesian laws. The claim was heard by the foreign arbitration tribunal regardless of the fact that he was accompanied by his staff and lawyers during the negotiations of the agreement, many of whom should have understood the Indonesian language very well.
In that case, the deed was a loan agreement, which is not required to be made in a notarial deed under the Indonesian laws. Even so, the plaintiff could still argue that the lack of translation not only nullifies the notarial deed (which would lead to the deed becoming a privately made agreement) but also to the nullity of the agreement in principle as he had signed an agreement the contents of which he was totally unaware. In other words, the plaintiff was able to argue that one of the requirements for making an agreement under Article 1320 of the Indonesian Civil Code was not met, i.e. the consent of the parties to be bound by the agreement.
Supporting Documents for Signing the Notarial Deed
The following documents are some of the supporting documents that must be brought and shown to the notary:
If the signatory of a notarial deed is a natural person, the person must bring and show their original Identity Card: Kartu Tanda Penduduk (KTP) if he/she is an Indonesian citizen or passport if he/she is a foreigner. If the signatory is signing the notarial deed for and on behalf of a legal entity, he/she must show the establishment document(s) of the legal entity he/she is representing and the provisions in the internal document(s) of the respective legal entity which provide him or her with the authority to sign the document in the form of a notarial deed.
- Spouse Consent
Under Law No. 1 of 1974 concerning Marriages, any married person must have an approval from their spouse if they wish to perform any legal actions on the marital assets. Therefore, in relation to the making of a notarial deed, every signatory must bring and show the notary a spousal consent before he/she can sign a notarial deed which relates to the couple's marital assets, such as a notarial deed of agreement for the sale and purchase of assets (for example, a sale and purchase of shares, which, according to the Indonesian laws, must be made in a notarial deed if the sale and purchase agreement triggers an acquisition in the company issuing the shares) or a the notarial deed of a collateral agreement (for examples, a fiduciary security agreement or a land mortgage (hak tanggungan) agreement, which, according to the Indonesian laws, must be made in a notarial deed).
- Power of
According to the Notary Law, the original signatory must appear before the notary to sign a notarial deed. In other words, the notarial deed cannot be executed by way of a counterpart method where each signatory party can sign anywhere. If a signatory cannot appear before the notary for any reason, they can be represented by another person based on a power of attorney. If the original signatory is an authorized director of a company, they must also be able to present any relevant provisions(s) in the corporate documents which grant them the authority to delegate their power to sign the document to any other person.The power of attorney can be made privately if the authorizer is within the Indonesian territory. If the authorizer is overseas and the power of attorney is to be exercised within Indonesian territory, the power of attorney signed by the principal must be notarized a the notary whose jurisdiction covers the foreign country and it must be legalized by the Indonesian embassy in the foreign country (Point 70 of Attachment of Regulation of the Minister of Foreign Affairs No. 09/A/KP/XII/2006/01 concerning General Guidance on the Procedure of Foreign Relations and Partnerships by Local Governments). The original power of attorney needs to be presented before the notary as, according to Article 47 paragraph (1) of the Notary Law, it will be attached to the notarial deed by the notary.
In term of jurisdiction, you should ensure that the agreement is signed somewhere within the jurisdiction of the notary. For instance, if the jurisdiction of the notary is Tangerang, do not sign the agreement in Jakarta.
In this respect, we refer to Article 17 paragraph (1).a in conjunction with Article 18 of the Notary Law:
Article 17 paragraph (1).a of the Notary Law:
"(1) A Notary is prohibited from:
a. Performing his office outside the jurisdiction of his office."
Article 18 of the Notary Law:
(2) The Notary has a jurisdiction of office which covers the entire area of the Province in which the Notary is domiciled."
Any party could use location defect in the place where the notarial deed was signed to ask for the notarial deed to be annulled, which annulment would then cause the deed to become a privately made agreement.
In practice, the annulment of a notarial deed due to the lack of a required formality under the Notary Law will need to be declared by the court, specifically in the case where the parties to the deed are disputing the validity of the deed. Under Review (Peninjauan Kembali) Decision No. 85/PK/Pdt/2010 dated 19 November 2010, a notary making a deed cannot declare the annulment of the deed he made even though some errors occurred when the deed was being made. Apart from the errors and inconsistencies revealed during the court examination, the Indonesian Supreme Court took the view in rendering the Review Decision that the duty of the notary is only to make the agreement in the form of a deed and therefore the notary cannot revoke the deed he made as the agreement itself was entered into based on the mutual consent of the parties thereto.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.