Article 1337 of Indonesian Civil Code (ICC) stipulates, “A cause is prohibited if it violates the law or is contrary to good morals or public policy”. This provision is related to the previous provision, namely Article 1335 on the same subject matter. This article will discuss the one element set forth in the Article 1337, namely public policy.
This section will examine the panel of judges’ perspective on applying public policy principles in contract enforcement in Indonesia. There will be an examination on “how judges construct and describe conditions that are considered to violate public order in an enforcement of contract” so that it can become the basis for imposing a court decision that ensures the application of the public policy principle.
The panel of judges of Semarapura District Court through the Decision Number 09/PDT.G/2010/PN.SP considered that “the land sale and purchase transaction based on a power of attorney to sell (absolute power of attorney) carried out by Plaintiff II violated the applicable laws and regulations (Minister of Home Affairs Instruction Number 14 of 1982). Consequently, they concluded that the power of attorney has violated public policy. Thus, the sale and purchase is considered as null and void”.
This decision indicates that the judge viewed that the violation of the applicable regulations as violating public policy. In this case, the violation is on the regulations below the law, namely Minister of Home Affairs Instruction. It is not even considered as a regulation by definition since it is not publicly binding.
Similar consideration can be seen under the Decision No. 24/PDT/2017/PT DKI where the panel of judges’ consideration may be seen as implying that the violation of prevailing laws and regulations, on that case is the Presidential Decree in the agreement, is considered as violation of public policy. The decision of the High Court was upheld by the Supreme Court in which the judex juris considers that unilateral termination of agreement has ignored the Presidential Decree and will cause legal uncertainty and distrust to the government of Indonesia.
Based on the explanation above, it can be concluded that the public policy principle is an essential principle that cannot be ignored in a contract. From the provisions of Article 1337 of ICC, the public policy can be seen as causing the contract to be either null and void or unenforceable. That provision stipulates that the cause of an agreement must not violate law, ethic, and public policy. From the two decisions outlined above, the public policy when an agreement is made by violating the regulations, below the law. As in the two cases above, the violation was on the Minister Instruction and then Presidential Decree.