INDONESIA Trends and Developments Contributed by: Farih Romdoni Putra, Aditya Bagus Anggariady, Ghifar Hilmi and Andhika Kusumonegoro, KARNA
those arising from offshore loan agreements, bond issuances or cross-border trade transactions. Many Indonesian corporations rely on external financ - ing from international financial institutions, export credit agencies or global bond markets, where trans - actions are typically documented in foreign curren - cies. Recognising such debts within the scope of Law 37/2004 ensures that these creditors may participate in the verification and voting processes during PKPU or bankruptcy proceedings, thus reinforcing proce - dural fairness and legal certainty. Third, the recognition of debts in foreign currencies has practical implications for the administration of the bankruptcy estate. Although the claim may be denominated in a foreign currency, for the purpose of distribution, the amount is usually converted into Indonesian rupiah based on the prevailing exchange rate on the date of the bankruptcy declaration. Governing law of the agreements Although foreign creditors appear adequately pro - tected through the recognition of debts denominat - ed in foreign currencies under Law 37/2004, foreign creditors – particularly investors, lenders and lessors – need to ensure that their agreements with Indone - sian counterparties are governed by Indonesian law. This is related to the territorial principle in Indonesian cross-border insolvency law. The use of Indonesian law as the governing law is not only relevant where the debtor is domiciled in Indonesia, but also criti - cal in cases where the debtor is a foreign entity (for example, a holding company incorporated in a neigh - bouring jurisdiction) that has a guarantor or security provider domiciled in Indonesia. This approach helps safeguard the enforceability and recognition of claims submitted by foreign creditors in Indonesian insolvency proceedings. Under Law 37/2004, the recognition of debt is premised on the concept of a “debt that can be proven in a simple manner” (simple evidence requirement). The primary risk in choosing a foreign governing law is the potential difficulty in meeting this standard of proof, as there are situations where an obligation may not yet be deemed
to have arisen – or may only materialise upon the com - mencement of bankruptcy or PKPU proceedings. Accordingly, the use of Indonesian law as the govern - ing law ensures greater legal certainty, simplifies evi - dentiary requirements and strengthens the position of foreign creditors before Indonesian commercial courts in the event of insolvency proceedings. Regulatory Updates In principle, to date, Law 37/2004 has not undergone any substantive amendment. The limited changes related to this law have only resulted from: • amendments to other related laws, which required adjustments to institutional authorities; and • judicial review petitions submitted to the Constitu - tional Court, which focused only on specific provi - sions of the law. Nevertheless, the Supreme Court of the Republic of Indonesia has taken an active and progressive role in providing judicial guidance to Indonesian judges, particularly those serving in the commercial courts, to ensure a consistent perspective and uniformity in handling bankruptcy and PKPU cases. Although such guidelines do not constitute binding sources of law in the same way as legislation, they serve as important interpretive references for business actors – especially investors, lenders and lessors – as well as for legal practitioners seeking to understand the judicial approach and reasoning commonly adopt - ed by Indonesian courts in insolvency proceedings. Accordingly, the Supreme Court guidelines, issued through its Circular Letters ( Surat Edaran Mahkamah Agung SEMA), have also been included, to provide readers with a clearer understanding of how these judicial directions influence the practical interpreta - tion and application of bankruptcy and PKPU law in Indonesia. In the past two years, the practice of bankruptcy and PKPU in Indonesia has experienced significant devel - opments through two Supreme Court Circular Letters, SEMA No 3 of 2023 and SEMA No 2 of 2024. Although these SEMAs do not formally amend Law 37/2004,
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