Indemnity clauses are a common feature in international contracts, particularly those governed by common law, where they serve to shift liability and allocate risk beyond fault-based damages. However, these clauses often clash with the Indonesian legal system, which is rooted in civil law and does not recognize indemnities as standalone obligations.

In this article, Dentons HPRP lawyers, Fabian Buddy Pascoal (Partner) and Steven Feriyanto (Associate), explore the legal disconnect between the broad use of indemnities under common law and the more restrictive compensatory rules under Indonesian law. They examine how these differences impact enforceability and risk allocation in cross-border transactions. 

Drawing from their experience advising on complex cross-border deals, the authors provide practical strategies for drafting indemnity provisions that align with Indonesian legal requirements. These include reframing indemnities as contractually anchored obligations, avoiding conflicts with core civil code principles, and carefully selecting governing law and dispute resolution forums.

This article offers valuable guidance for commercial parties seeking to balance commercial certainty with legal enforceability in contracts involving Indonesian counterparties.

Read the full article here.

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