How to Draw Up a Fair International Business Agreement

Many of my clients, especially those from outside the Indonesia, ask why it is so difficult to make a fair international business agreement in Indonesia with the subject of Indonesian legal entity. Actually, I think the question is funny and unfounded because Indonesia is a country that respects international law in recognition of business agreements between its legal entity and legal entity coming from outside the country.

But the agreement is a consensus, so here the role of each party is needed-so that in an agreement the interests of each party is protected. As specified in Article 1338 of the Indonesian Civil Code, the treaty shall be regarded as law for the parties whom making it. This provision provides the widest space to the parties in making agreements that benefit all parties. However, it should be remembered that, nevertheless, the agreement made should not conflict with applicable regulations and local customs (Article 1337 Indonesian Civl Code). The question is, what is the principles can be secured so that you can make a fair deal with the subject of Indonesian law in Indonesia? here the list:

1. Fall under the applicable Law

This principle I place in the first position because the essence of the treaty in Indonesia should not conflict with applicable laws, as I have explained. Since you are a foreigner, then make sure your binding agreement does not contain any provisions that harm you. For example, there are my clients from Texas, anxious that their business partners in Indonesia have not deliberately notified that the assets of the joint venture company they build can not be owned by the foreigners while the capital of the movable assets is a contribution from it. This is certainly a big loss and now the Texas businessman is trying to get his rights back fairly, but still fails because it is not careful in making agreements that violate the regulations in force in Indonesia.

2. Protective Clause

In the preparation of international business agreements in Indonesia, you enter a protective clause. What is a protective clause? this clause is basically a clause that protects your rights if not clearly defined in the agreement. We realize that the agreement is something that is limited in form, whereas the rights and obligations of the parties are so wide that it is impossible to pour it all into a single agreement. The contents of this protective clause basically reads “important provisions not yet provided for in this agreement, are deemed to have been entered and if necessary to be included in the amendment of the agreement”, the content of which is dependent on you and partner, can harm you.

3. Know Partner Partner’s Intentions

This may be a too cliche and difficult principle to know, because who knows one’s bad intentions? but believe me, as great as a person keeps his bad intentions, it will be seen, in any case. You have to be careful because more and more fraud perpetrators in the business world including in Indonesia. As to what I can not figure out, why many business peoples from highly educated advanced countries can fall into the bait of the fraud. In starting a business with partner colleagues, you must first see their intentions. How to see someone’s intentions? see from the initial effort, did they prepare their capital seriously? how often do they contact you for the purpose of the partnership business? and are your partner partners only discussing profits without putting a tough initial effort first? this needs to be your concern, so you will know who the people who want to do business or just want to trap you to their advantage.

These are the principles that you can apply in arranging international business agreements in Indonesia. There are many more tips that I can give but I will discuss in the next post.


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