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The Coronavirus Disease 2019 (COVID-19) has caused discourse about Force Majeure especially with regards to the performance of an agreement. The issuance of the Presidential Decree Number 12 Year 2020 regarding the Determination of Non Natural Disaster of the Outbreak of Corona Virus Disease 2019 (COVID-19) as National Disaster (“Decree 12/2020”) on 13 April 2020 has raised a question whether the Decree 12/2020 can be used as a basis to argue that COVID-19 constitutes a Force Majeure. Some people argue that the Decree 12/2020 can be used as the basis to argue that COVID-19 constitutes a Force Majeure and therefore can be used also as a justification for a party in an agreement who do not perform their obligation, but there’s also people who argue otherwise, among other is the Coordinating Minister of Politic, Law, and Security Affairs, Mr. Mahfud MD.[1] 

Therefore, firstly, it is necessary to study the provisions related to Force Majeure in Indonesia.

Force Majeure / Overmacht under Indonesian Law

Force Majeure is regulated under the Article 1244 and 1245 of the Indonesian Civil Code (“ICC”), which state:

Article 1244 of ICC

If there is any reason for such, the debtor should compensate for costs, damages and interests if he cannot prove, that the non-performance or the late performance of such obligation is caused by an unforeseen event, for which he is not responsible and he was not acting in bad faith.

Article 1245 of ICC

The debtor needs not compensate for costs, damages or interests, if an act of God or an accident prevented him from giving or doing an obligation, or because of such reasons he committed a prohibited act.

If we look into the Article 1245 of ICC, there’s a phrase “act of God”[2] which is a translation from the word Overmacht[3]. Under Indonesian Law, the term used for Force Majeure is Overmacht or “Keadaan Memaksa”. Although to be noted is that there is another term often used to describe the idea of Force Majeure in Indonesian language, which is Keadaan Kahar. All of these terms always referred back to the provision of Overmacht/Keadaan Memaksa under the Article 1244 and 1245 of ICC mentioned above.

The two abovementioned provisions do not provide a detailed list of events or occurrences that can constitute a Force Majeure. However, if we look into those two provisions we can get the elements of Force Majeure under Indonesian Law.

Elements of Force Majeure under Indonesian Law

From the provision of Article 1244 and 1245 of ICC and also explained by an Indonesian Civil Law Expert, J. Satrio, the elements of Force Majeure are as follows:[4]

  1. An occurrence of an event that prevent the debtor to perform its obligation, such prevention that justifies the debtor to not perform its obligation or to not perform the obligations as it is supposed to be (or agreed);
  2. No fault on the debtor for the occurrence of the event that prevent the performance of the obligation; and
  3. Cannot be predicted beforehand by the debtor.

What it means with these elements is if a debtor intends to argue on Force Majeure for the non-performance or late performance of an obligation, he should prove the three elements; which are (i) he is unable to perform the obligation because he is prevented to do so due to an occurrence of an event, (ii) such event is not caused by the fault of the debtor; and (iii) such event is unpredictable beforehand by the debtor. It is not sufficient if the debtor only proves one or two elements, the three elements must be fulfilled.

Because ICC doesn’t lists the events or occurrences that constitutes a Force Majeure, it can be concluded that the events referred to in the ICC do not limited to any event that is generally accepted or understood as Force Majeure, such as natural disaster, war, non-natural disaster and so forth, but all event that could fulfill all the above mentioned elements.

Important note from those three elements is the element of “event that prevent debtor to perform its obligation”. Why is it important? Because there are various forms or types of agreements and of course the obligation that should be performed is vary in its type and form. In addition, the factors that can cause an obligation to be performed or not are also vary. Therefore, it is possible an event which is generally accepted as Force Majeure but for a certain agreement cannot constitute a Force Majeure, because the event does not fulfill all the above mentioned elements of Force Majeure for such agreement.

Therefore it is important to argue on Force Majeure by looking whether a debtor is becoming unable to or being prevented to perform its obligation due to the occurrence of a certain event, instead of looking whether such occurrence or event, for example COVID-19 pandemic, as Force Majeure.

In theory, in order to decide whether an occurrence of event constitutes a Force Majeure it can be looked from the objective and subjective point of view. What it means from the objective point of view is by determining whether any person if he was a debtor and facing such certain event or occurrence will definitely be unable to perform its obligation. While what it means by the subjective point of view is by looking from the capability of the said debtor with all of its characteristic or in other words the ability, social level, economic capability of the said debtor should be considered.[5] 

It must be noted, the development of Force Majeure in the judges decisions in Indonesia is that the judges tends to look upon an event from the subjective point of view, not only from the objective point of view. In some cases, natural conditions which cause debtor to fail in performing its obligation are not considered as Force Majeure by the judges.     

So it can be concluded that in order to decide whether an occurrence of event constitutes a Force Majeure or not, will depend on the form or type of the obligation that should be performed by the debtor and the condition and characteristics of the said debtor.

Some Illustration for Consideration

In order to have a better understanding of Force Majeure under Indonesian Law, we will give the following illustration which is related to COVID-19.

First, a person has the contractual obligation to pay Rp 2.000.000,00 (two million Rupiah) to its counterpart in Indonesia on 1 April 2020. Then the Decree 12/2020 was issued. The question is, whether such person may under the law to not perform its obligation because he cannot come out of his house to do the transaction? Of course not! Because the transaction can be done via internet banking which is commonly used. Therefore, the debtor cannot argue on Force Majeure and evading payment to its creditor. COVID-19 and Decree 12/2020 are not events that prevent the person to perform its contractual obligation.

Second, a singer who domiciled in City A in Indonesia has a contract to perform in a concert in City B. Then, in order to minimize the COVID-19 pandemic, the government of City B decides to lock-down the city.  As the result no one is allowed to enter or out of City B, moreover all flights to City B are stopped. But the Event Organizer (EO) of the Concert still holds the concert. In this situation the absence of the singer in the concert can constitute a Force Majeure. Furthermore, if the EO suffers loss due to the singer’s absence then the EO cannot demand for compensation from the singer.

From the above two illustrations, it can be seen that in order to decide whether COVID-19 can constitute a Force Majeure will depend on the obligation that should be performed by such party and the condition or characteristic of such party.

The legal basis of Force Majeure are Article 1244 and 1245 of ICC which is the continuation of the Article 1243 of ICC, which is the basis to demand for compensation if a party in the agreement fail to perform its contractual obligation. The Article 1244 and 1245 of ICC is the exception for the provision of the Article 1243 of ICC.

Force Majeure Clause in the Agreement

Other than being regulated in the ICC, the Force Majeure provision is generally stated in the agreement (the Force Majeure Clause).

According to the Article 1338 of ICC (the pacta sunt servada principle) the agreement constitutes as law for the parties therein. Therefore each party should honor the terms of the agreement. On this reason, the force majeure clause in the agreement may be used to protect a party in the event that such party is unable to perform its obligation due to the occurrence of events which is according to the agreement deemed to be Force Majeure.

In relation to COVID-19, it need to look further whether in the agreement a pandemic, or non-natural disaster is deemed as an event of Force Majeure.

If yes, the further question is whether the occurrence of the pandemic has surely caused a party to become prevented to perform its obligation? If no, then the occurrence of COVID-19 cannot constitute a Force Majeure.

Although the agreement lists the events that are considered as Force Majeure, but in order to argue on it, the elements from the article 1244 and 1245 of ICC should also be proven.

There is already an Indonesian court decision that does not consider an event as Force Majeure although such event is stated in the agreement as Force Majeure.[6]

The important thing is if the agreement stipulates that a pandemic or non-natural disaster is a Force Majeure, then in order to prove that a Force Majeure has happened, it is not sufficient only by arguing with the provision in the agreement as it basis. But the party arguing on the Force Majeure should also prove the three elements from the article 1244 and 1245 of ICC.

Then, if the agreement does not stipulate about Force Majeure, does the debtor who is unable to perform his obligation due to COVID-19 and/or the Government’s policy still can defend himself with Force Majeure? The answer is yes, he still can argue on Force Majeure.

If we look into the provision of Article 1339 of ICC, it is stated that:

“Agreements bind the parties not only to that which is expressly stipulated, but also to that which, pursuant to the nature of the agreements, shall be imposed by propriety, customs, or the law.

From this provision it can be concluded that although the agreement does not stipulates about Force Majeure, the debtor still can defend himself with Force Majeure.

Expert and lawyer also express their opinion on this issue:

  1. According to Abdul Salam, Civil Law Lecturer in University of Indonesia, the Article 1245 of ICC which is contained under Book III of ICC has the characteristic of accessory to an agreement. This means, as long as the party does not agree otherwise, then the provision of the Book III, especially on Force Majeure, shall apply.
  2. According to Ricardo Simanjuntak, from the provision of the Article 1244 and 1245 ICC, it can be seen that under Indonesian Law, the Force Majeure shall be applicable by law, and not according to the consensus of the agreement (contractual obligation). Meaning, although the party may not specifically stipulate the Force Majeure doctrine in the agreement, the Force Majeure doctrine remains by law applicable as a legal ground for a party that is unable to perform his obligation as agreed under the agreement.[7]

Does Force Majeure terminate the Agreement?

Basically Force Majeure is not a ground for agreement termination, instead it is a justification for a non-performance of an obligation by a party. However, this will depend on the nature and type/form of each agreement.

According to its nature, there are two types of Force Majeure, temporary and permanent. Temporary means that the Force Majeure causes the performance of an obligation to be delayed from the agreed time. In this case the obligation has not ceased, but it only delays the obligation of one party. Therefore, if the Force Majeure event ceases then the debtor should perform its obligation and the agreement is not terminated.

However, if the Force Majeure is permanent means that the Force Majeure has made the contractual obligation is impossible to be performed. In this case it is possible for the agreement to be terminated.

Government Policy as a response to COVID-19 Pandemic

After explaining about Force Majeure and see whether COVID-19 is a Force Majeure or not, then it is also proper if we consider the government’s policies that is issued as a response to the COVID-19 pandemic.

Why? AS we have explained above that Force Majeure is not limited to any natural, social, and non-natural events, such as COVID-19 pandemic. Force Majeure can also include any regulation or prohibition issued by the government. It is possible a debtor cannot perform its obligation because the performance will cause him to violate the law and will be sentenced.

It can be analogized from the provision of article 1444 and 1445 of ICC[8] in relation to the destruction of the goods (the goods as the object of an agreement). It is stated in that provision that in the event that the goods becomes un-merchantable, it may terminate the obligation, insofar that the debtor possess no fault and the debtor has not defaulted in delivering the goods.

In theory, Articles 1444 and 1445 of ICC are also becomes the legal basis for Force Majeure in general and not only for the agreement that obligates one of the party to deliver a goods/asset. From the provision of article 1444 we can analogize that when an obligation becomes prohibited or its doer to face sentencing then it can become a reason for Force Majeure if the debtor does not perform the obligation.

On 17 March 2020 the Minister of Trade issued a Minister Regulation Number 23 Year 2020 (“MOTR 23/2020”) which prohibit export of medical equipment. If it is applied into a case and on COVID-19 pandemic situation, if a medical equipment business has an agreement with any foreign party to export medical equipment, then this regulation will prevent the business to perform its contractual obligation. Therefore in this case the issuance of MOTR 23/2020 is a reason to argue on Force Majeure.

However, it should be noted that, in this case in order to argue on Force Majeure the debtor should also prove that it possess no fault and have not been declared default in performing its obligation.

In this COVID—19 pandemic situation, there are some regulations or policies issued by the Government, such as the Large Scale Social Restriction. The issuance of these regulation can be used as the reason to argue on Force Majeure as long as such party can prove he is being prevented to perform the obligation due to the issuance of the regulation, and he possess no fault and have not been declared default.

How about the Decree 12/2020?

At the beginning we mention about the debate on whether the Decree 12/2020 can be used as the basis to argue on Force Majeure. The points contained in the Decree 12/2020 are:

  1. Declaring the non-natural disaster of COVID-19 as national disaster;
  2. The disaster management of COVID-19 shall be performed by the Task Force; and
  3. Appoint the Governor, Regent, and Mayor as the Chief of the Task Force for countermeasure against COVID-19 in the regional level.

Then if we consider our explanation above, can this Decree become the basis for Force Majeure? The answer will depend on each party to their agreement, does the content of the Decree (the three points above) causes such party to be prevented in performing his obligation?

However, the Decree can be used as a basis to prove the existence of non-natural disaster. But, in order to prove that the non-natural disaster is Force Majeure or not, a further proof on the elements of Force Majeure as explained above is needed. It is a matter of fact that the non-natural disaster happened. But does such non-natural disaster causes prevention of a performance of obligation? That is another question and further examination is needed. In conclusion with this matter, in our opinion just by using the Decree 12/2020 as the basis is not sufficient to argue on Force Majeure.

Hope this is useful.

This article is prepared by our Associate Gerald Saratoga Sarayar.

FREDRIK J PINAKUNARY LAW OFFICES

This article also available in Bahasa Indonesia. Follow this link to access the Bahasa Indonesia version: Pandemi COVID-19 dan Force Majeure (Overmacht).


[1] https://kumparan.com/kumparannews/mahfud-md-corona-jadi-bencana-nasional-tak-bisa-jadi-alasan-force-majeure-1tDo82wD6AB

[2] The Indonesian translation uses the phrase “keadaan memaksa” which can be translated into English as “forced event” in the sense that any event that force a person to not be able to fulfill its obligation. The English translation is also not an official translation. The term “keadaan memaksa” doesn’t made reference to a divine being, such is the case with the word ‘God’ in English.

[3] Indonesian Civil Code is based on Dutch Civil Code (“Burgerlijke Wetboek”) which has been used since the Dutch era of Indonesia. Indonesia still uses the same Civil Code. Furthermore, until now there is no Indonesian Official Translation to the Civil Code. Indonesians use translation made by a Civil Law Professor, Prof Subekti, and it is widely used and accepted by many students, lawyers, professors, academics, and even judges. That is why many legal terms applied in Indonesia still use the Dutch term contained within the Burgerlijke Wetboek, such is the case of Overmacht.

[4] J. Satrio, Hukum Perikatan, Perikatan Pada Umumnya or The law of Obligations, Obligations in General,  3rd Ed, (Bandung: Alumni, 1999), page 253

[5] Ibid. page 263

[6] Decision of the Supreme Court of the Republic of Indonesia No 587 PK/PDT/2010. In this case the debtor has a contractual obligation to deliver coal, but fail. The Debtor argued that there are event of Force Majeure, which is heavy rain and flood. Under the sale and purchase agreement flood is considered as Force Majeure. But the judges refused to consider the heavy rain and flood as Force Majeure. The judges considered the witness testimonies which stated that in certain months of the year (the months of the delivery) heavy rain is common, and therefore the judges consider that such occurrence (heavy rain) can be predicted beforehand, and did not consider it as Force Majeure.

[7] Ricardo Simanjuntak, Teknik Perancangan Kontrak Bisnis or Business Contract Drafting Technique, page 203.

[8] Article 1444 of ICC

Where a certain specific assets that constitute the subject matter of the agreement are destroyed, becomes un-merchantable, or are lost, to the extent that one is not aware whether or not the assets still exist, the obligations are discharged, insofar as the assets are destroyed or lost due to no fault of the debtor, and prior to his defaulting on delivering the assets.

Notwithstanding the default of the debtor on delivering the goods, which were previously not insured against unforeseeable events, the obligations are also discharged if the goods would have perished in a similar manner had they been delivered to the creditor.

The debtor must prove the unforeseen circumstances he asserts.

Irrespective of the manner in which the goods are lost or destroyed, the individual who has expropriated these assets are not relieved from the obligation to compensate the value thereof.

Article 1445 of ICC:

If the assets owed are destroyed, becomes un-merchantable or are lost through no fault of the debtor, the debtor is required, if he has any rights or claims for recourse related to these assets, to assign them to the creditor.


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