Indonesia – Constitutional Court’s Interpretation On The Execution Of Fiducia Security.

28 February, 2020

 

Just before the end of 2019, the Indonesian Constitutional Court (the “Constitutional Court”) rendered a decision with regard to the application for judicial review of certain provisions under Law No. 42 of 1999 concerning Fiducia Security (the “Fiducia Law”) through its decision No. 18/PUU-XVII/2019.The Constitutional Court’s decision sets out its interpretation on the statutory right vested in fiducia security grantees (or creditors) to enforce the execution of fiducia security.

 

In summary, the Constitutional Court ruling that the executory title of fiducia grantees provided in Article 15 paragraph (2) of the Fiducia Law and the phrase “default” provided in Article 15 paragraph (3) of the Fiducia Law are inconsistent with the Indonesian Constitution of 1945 and contradicts with the principle of legal certainty, impartiality and equality. The Constitutional Court’s decision is final, binding and not subject to appeal.

 

Fiducia Security under Indonesian Law

 

Fiducia security is a type of security under Indonesian Law created over moveable assets whether tangible or intangible, particularly for assets which cannot be encumbered by either a land mortgage or a hypothec. A fiducia security can also be granted over existing and future assets. The fiducia security grantor remains in possession of the fiducia security object. A fiducia security must be made between the fiducia security grantor and the fiducia security grantee in the prescribed statutory form of a notarial deed. To perfect the security created by a fiducia security, the fiducia security grantee must register the notarial deed at the Fiducia Registration Office, which will issue a certificate of registration as evidence of perfection.

 

Recent Interpretation on Article 15 paragraphs (2) and (3) of the Fiducia Law

 

The Constitutional Court provides interpretation of the relevant articles as follows:

 

• Article 15 paragraph (2) of the Fiducia Law and its elucidation must be interpreted that the fiducia security grantee (or creditor) must apply for a Civil Court’s assistance to possess and sell the fiducia security object if there is no agreement on the occurrence of default and the fiducia security grantor refuses to surrender the fiducia security object voluntarily to the fiducia security grantee (or creditor).
• Article 15 paragraph (3) of the Fiducia Law must be interpreted that the creditor cannot determine the debtor’s default unilaterally, instead the occurrence of default must be based on the parties’ agreement or pursuant to a certain legal action.