Chandra Kurniawan
chandra.kurniawan@iab-net.com
IAB&F Law Firm
A: Intiland Tower 9th Floor
Jl. Jenderal Sudirman 32
Jakarta Pusat 10220
T: (62) 21 5790 5090 ext. 137
F: (62) 21 5790 5080
W: www.iab-net.com
The Indonesian Government issued Law No. 7 of 2011 regarding Currency on 28 June 2011 (“Currency Law”) as a symbol of sovereignty that must be highly regarded and honored. Pursuant to Article 21 of the Currency Law, Rupiah must be used in any transaction as a currency of payment, settlement of other obligations that must be fulfilled by money and/or other financial transactions except for: certain transactions related to the implementation of the state budget; receipt of grants or gifts, where the payer or recipient is located outside Indonesia; international commercial transactions; bank deposits in foreign currency; or international financing transactions.
Further, Article 23 of the Currency Law prohibits a party from refusing Rupiah as payment of transactions within Indonesia, except if: (1) there is doubt about the authenticity of Rupiah in a cash transaction, or (2) agreed in writing where the transactions is otherwise an exempt transaction.
Violation to the above articles is subject to a one-year imprisonment and a maximum fine of 200 million Rupiah.
On 31 March 2015, Bank Indonesia as a monetary authority considered it necessary to issue Regulation No. 17/3/PBI/2015 on the Mandatory Use of Rupiah within the Territory of Indonesia, followed by Circular Letter No. 17/11/DKSP on 1 June 2015 (together, the “BI Regulations”) to strengthen and support the stability of Rupiah that at this time is weakening. The BI Regulations provide more details on the obligation to use Rupiah for cash and non-cash transactions. For cash transactions, the BI Regulation is effective as of 31 March 2015 and for non-cash transactions as of 1 July 2015.
Any extensions or amendments to existing non-cash written agreements will be subject to the BI Regulations. The BI Regulations also require that all price quotations should be in Rupiah only. Therefore, the common practice of quoting US$ or other foreign currency prices for goods and services (such as hotel rooms and professional services) is now prohibited. Bank Indonesia has also proactively coordinated and cooperated with other government authorities to enforce the implementation of the BI Regulations.
Despite the BI Regulations being controversial, it is important to note that the BI Regulations is the prevailing law in Indonesia. Therefore, all parties carrying out transactions in Indonesia must comply with the provisions of BI Regulations or risk facing the possible cancellation/annulment of the contract in addition to the applicable administrative and criminal sanctions under the BI Regulations and Currency Law. One of arguments against the application of the BI Regulations and Currency Law is that the criminal sanctions are not just and hence may not be enough deterrence. As such, criminal sanctions should be the last resort in enforcing the BI Regulations and Currency Law. The image of Indonesia as a country that is conducive for investment and friendly for business activities must be maintained and developed.