• ISSUANCE OF THE CURRENCY ACT

• 26 July 2011 by admin 0 Comments

On 28 June 2011 the Indonesian Government issued a Currency Act, Law No. 7 of 2011. This Currency Act also came into effect on the date of its enactment, i.e. 28 June 2011.

In brief, the outline of the contents provided for in this Currency Act are: (a) regulations regarding physical Rupiah, i.e., with regard to the type and value, characteristics, design, and raw materials of Rupiah, (b) regulations regarding the management of Rupiah from planning to printing, issuing, circulating, discontinuance and withdrawal, and destruction of Rupiah, (c) regulations regarding the mandatory use of Rupiah, the exchange of Rupiah, the prohibition and eradication of fake Rupiah, and (d) regulations regarding criminal provisions related to matters of the use, copying, damage, and forgery of Rupiah.

The interesting issue in this Currency Act which could give rise to substantial concerns among business actors is the provisions regarding the mandatory use of Rupiah in every transaction within the territory of the Republic of Indonesia as reflected in Article 21 juncto Article 23 of the Currency Act.

Article 21 regarding the Use of Rupiah provides that:

(1)        Rupiah must be used in:

1. any transaction the purpose of which is payment;
2. settlement of other obligations which must be met in money; and/or
3. other financial transactions (‘other financial transactions’ means those involving customers’ deposit into a bank of money in various amounts and denominations);

which are performed in the Republic of Indonesia.

(2)        The obligations contemplated in paragraph (1) do not apply to:

1. certain transactions in the context of implementing the state’s budget;
2. receiving or giving donations from or to countries abroad;
3. international trade transactions;
4. bank deposits in the form of foreign currency; or
5. international payment transactions.

Article 23 regarding Prohibitions provides that:

1. No person shall refuse to accept Rupiah intended as payment or the settlement of obligations which must be met in Rupiah and/or for other financial transactions in the Republic of Indonesia, except in cases of doubt whether the Rupiah are genuine.
2. Payments or the settlement of obligations in foreign currencies which have been contracted for in writing are exempted from the provision contemplated in paragraph (1).

Further, the non-use of Rupiah or refusal to accept Rupiah as referred to in Article 21 and Article 23 above could attract criminal sanctions as regulated in Article 33 regarding Criminal Provisions.

Article 33 provides that:

1. Any person who does not use Rupiah in: (a) any transaction the purpose of which is payment, (b) settlement of other obligations which must be met in money; and/or (c) other financial transactions, as referred to in Article 21 paragraph (1) shall be liable to a term imprisonment of not more than 1 (one) year or a fine of not more than IDR 200,000,000 (two hundred million Rupiah).
2. Any person refusing to accept Rupiah intended as payment or the settlement of obligations which must be met in Rupiah and/or for other financial transactions in the Republic of Indonesia, except in cases of doubt whether the Rupiah are genuine, as referred to in Article 23 shall be liable to a term imprisonment of not more than 1 (one) year or a fine of not more than IDR 200,000,000 (two hundred million Rupiah).

With the above provisions, the Currency Act regulates that the use of Rupiah in any transaction for the purpose of payment, in the settlement of other obligations which must be met in money, and/or for other financial transactions performed in the Republic of Indonesia is mandatory and the Currency Act provides criminal sanctions for those who do not do so, unless the above uses of foreign currency have been contracted for in writing. However, since there are some provisions which remain unclear, such as the absence of any explanation of what is meant by international trade transactions and international payment transactions as well as a clear understanding regarding the types of written contracts which can be exempted from the use of Rupiah, the Currency Act has a transitional provision stating that implementing regulations of the Currency Act must be promulgated no later than 1 (one) year from when the Currency Act is enacted.

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