Making Sense of the Indonesian Legal System
SECOND IN A TWO-PART SERIES ON INVESTING IN BALI
By Daniel O’Leary
In terms of the legal system in Indonesia, the three most commonly used services in the legal profession are provided by notaries (notaris), lawyers (pengacara) and legal consultants (konsultan hukum).
A notary is required to hold a bachelor’s degree in law (SH), a Masters Degree in Notarial Law followed by Ethics and Company incorporation courses and one year of practical training with a licensed notaris. Licenses to practice are issued by the Ministry of Justice. Notaris typically provide legal advice, handle civil and commercial agreements/contracts, leases, deeds and company incorporation. Many notaris also hold PPAT licenses issued by the Ministry of Lands which qualifies them to process transfers of ownership of land titles.
A lawyer is required to hold a bachelor’s degree in law “SH” followed by an Advocacy training course and a period of practical training in a registered lawyer’s office. Licenses to practice “SK” are issued by the regional High Court. Lawyers typically provide general legal advice, handle criminal cases, breach of contract, immigration problems, litigation and representation at court.
The most common mistake I see investors making when seeking professional legal advice is they often go to a lawyer when they should be hiring a notaris, and visa versa. This is especially common with those of us from an Anglo-Saxon system where the function of a public notary is to witness signatures and they are not required to have any legal knowledge, often being the local postman, hotel manager or publican. In the Indonesian system, a notaris is the most qualified legal professional and the only one who can execute commercial contracts on behalf of clients. Making an incorrect choice won’t be fatal as you will probably end up in the correct office eventually but could waste precious time and money in the process.
Another misunderstanding occurs when foreigners are led to believe a person with an SH is a qualified lawyer or notaris. SH means the person has a bachelor’s degree in law and this does not qualify them to practice law, no more than it would do so in Western countries. To compound this confusion, there are many dodgy institutions handing out SH qualifications in Indonesia, just as there are dubious over-the-counter qualifications available in Western countries or online these days.
Before employing the services of a lawyer or notaris, it is good practice to ask them to show you their SK licence. I guarantee you they will be delighted to show off their qualifications as both titles are considered to be high positions in Indonesian society, where only a few percent get third-level education. If they are reluctant or hesitant to present you their credentials, then think again before hiring them.
Try to find a lawyer or notaris who speaks your language to a level you can understand. Going through your local friend whose English is “not so good” can be costly when dealing with legal documents. Leaving your notary’s office “thinking” you know what you agreed to/signed is a recipe for disaster. Get all documents officially translated before signing.
The third category you are likely to encounter in the legal profession is legal consultant/advisors (Konsultan Hukum). These businesses are commonly owned by professionals with connections to well-qualified lawyers, notaris and government officials. They usually provide a suite of services such as arranging notaries and lawyers as required, translations, licenses, permits, visas, etc. They can be useful if you are not confident in dealing with the various offices yourself and want to save time as they usually have a network of professionals in place to cater for common transactions.
It is common to find legal consultants combining their services with business and investment advisory services. For example, they may act as advisors for investment or development projects and also manage relations with government departments and local community leaders. Finding a consultant that you feel comfortable with should involve visiting a few companies who already provide the range of services you require and negotiating a fixed price for the service before signing up. Again, find a consultant that speaks your language to a competent level and remember that consultants are only as good as the connections and professionals they employ; so don’t be afraid to enquire as to the qualifications of the experts they use.
Overall, relocating to or doing business in another country is never an easy process, even when dealing with similar cultures, languages and legal systems. However, when you add different languages, laws and traditions it becomes much more challenging. Therefore, one has to be disciplined and methodical and exercise careful judgment at every step of the way. Some useful general guidelines to keep in mind:
• Professional advice is relatively inexpensive in Indonesia; verify qualifications and background and hire the best.
•If you are buying a property, have professional due diligence carried out; for example, you don’t want a 30-year lease on your house with only a 15-year lease on access.
•Be discerning: don’t always take things at face value and get a second opinion.
•Start by opening your own bank account; get your own safety box in the bank; and keep all your own important documents.
•Hire a professional or consultant that offers independent advice. Using the same broker you are buying the property from to arrange your legal affairs and permits may be convenient at the time but may also leave you very vulnerable later on if you have made a bad choice to begin with.
Doing things the legal way in Indonesia is not as difficult as many would have you believe. Basically, by employing a similar level of caution as you would at home and avoiding some of the main pitfalls discussed above, you can ensure the transition to your new home, business or life is as smooth as possible.
Then you can settle down to the real business – enjoying life in Bali.
Daniel O’Leary has lived and worked in Indonesia for 25 years, holds Indonesian citizenship and is the director of IndoAdvisors, a business and legal advisory service based in Bali.