Dr. Eddy Marek Leks December 6 2022 Determining interest rates: what will the courts decide? Leks&Co | Litigation - Indonesia Dr. Eddy Marek Leks Litigation Cost, losses and interest can be claimed if a party breaches a contract under the Indonesian Civil Code (ICC). It is possible to either claim the interest rate according to the law or determine the desired interest rate by reference to, for example, the credit interest rate. The question is, which will be approved by the judges?The courts seem to agree that the normal measure which should be used is the interest rate according to the law, not the banking interest rate or credit interest rate. In one case, the first-instance court granted an interest rate of 14% per year, but this was later corrected by the Supreme Court to 6%, according to the law. However, in a contrasting decision, the Supreme Court granted a higher interest rate claimed, stating that "the jurisprudence interest for 6% per year is out of date".(1) In that decision, the Supreme Court granted a 12% per annum interest rate, twice the rate under the law (6% per annum).Another question is whether the claim for "interest" can only be related to a loan agreement or whether it can be related to any obligation to pay a sum of money (eg, a payment of purchase price). The following Supreme Court judgment suggests that the interest is not only applicable to a loan arrangement obligation but also to any type of obligation:(2)Judex Facti has given sufficient consideration and is not contrary to the law, which is based on the sale and purchase agreements of Palm Oil for a period between October 2010 and September 2012 between the Plaintiff as the Seller and the Defendant as the Buyer, that the Defendant had breached a contract (default) to the Plaintiff which required the Defendant to pay the principal debt to the Plaintiff;Considering, . . . that the Judex Facti's decision of the High Court of Palangkaraya which affirms the decision of the District Court must be corrected as long as the amount of interest on the fifth (5th) decision, because it is too large and unfair, so that the fair interest according to the law is 6% (six percent) per year, calculated since the Plaintiff's lawsuit was filed until the decision in the a quo case is implemented; From the Supreme Court considerations above, it is also evident that the 6% interest rate is calculated since the lawsuit was filed, not since the default had occurred. This should have been the default decision since article 1250 of ICC stipulates that "the compensation of cost, loss and interest must only be made commencing from when it is requested before the Court." However, a judge must also consider calculating the imposition of interest since the occurrence of a default, not only since the lawsuit was filed. In its decision, the High Court clearly condemns the defaulting party to pay compensation on the basis of interest since the defendant had defaulted. The High Court decided:To condemn the Defendant to pay compensation for the loss of expected profit from that finance for 6% (six percent) every year and commencing from the Defendant had defaulted namely on the month of December 2016 until this case will be decided namely on 8 July 2020.This is also emphasised by the provisions of article 1250 of ICC that stipulate: "In each obligation merely relates to the payment of a sum of money."It is evident that the courts may not always agree on the interest rate or on the timing of when the interest rate is chargeable. The default perspective will surely be the safest route – namely, the 6% interest rate calculated from the time the claim is registered before the court. But this rule is not without exception, as is evident from other court decisions. In such situations, judges must carry out their duty and seek justice, which may cause their decisions to deviate from what has been stipulated under the law.For further information on this topic please contact Eddy Leks at Leks & Co by email ([email protected]). The Leks & Co website can be accessed at www.lekslawyer.com.Endnotes(1) Decision No. 844 K/Pdt/2011.(2) Decision No. 3070 K/Pdt/2017.