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Fiduciary Security Execution Redefined: The Indonesian Constitutional Court Ruling on Article 15 (2) and (3) of the Fiduciary Security Law 

by Lia Alizia, Cynthia Yunita Ilyas

Published: April, 2020

Submission: April, 2020

 



Background

On 15 February 2019, a petition for a judicial review was submitted by two individuals (“Petitioners”), claiming that their constitutional rights had been violated by Article 15 (2) and Article 15 (3) of Law No. 42 of 1999 on Fiduciary Security (“Fiduciary Security Law”). Under Article 15 (2) of the Fiduciary Security Law, fiduciary security certificates have the same executorial title as legally binding court rulings while Article 15 (3) of the Fiduciary Security Law authorizes fiduciary grantees to sell fiduciary objects in the event of default by the fiduciary grantors. By this petition, the Petitioners asked the Constitutional Court to declare the provisions unconstitutional on the ground that according to them, that they focus solely on protecting the rights of creditors and are prone to result in arbitrary actions by creditors against debtors. Further, the Petitioners claimed that the provisions violated their constitutional rights as debtors, as they failed to uphold the principles of legal certainty and equity before the law and to protect their ownership rights, all of which are guaranteed under the 1945 Constitution of the Republic of Indonesia. The background to the petition for a judicial review was that the Petitioners had entered into a fiduciary security agreement with a multi finance company to lease a motorcar. However, the motorcar (as a fiduciary security object) was taken in an allegedly violent manner by debt collectors without producing any underlying documentation on behalf of the multi finance company, as the fiduciary grantee, who claimed that the Petitioners were in default. In response, the Petitioners filed a lawsuit in the South Jakarta District Court which argued that these actions were unlawful and that the fiduciary grantee was therefore guilty. However, the fiduciary grantee impounded the fiduciary object, claiming that the relevant fiduciary security agreement was valid and binding under Article 15 (2) and (3) of the Fiduciary Security Law.




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Footnotes:

M&T Advisory is an email publication prepared by the Indonesian law firm, Makarim & Taira S. It is only intended to inform generally on the topics covered and should not be treated as a legal advice or relied upon when making investment or business decisions. Should you have any questions on any matter contained in M&T Advisory, or other comments generally, please contact your usual M&T contact or [email protected].


Contacts:


Lia Alizia: [email protected]
Cynthia Yunita Ilyas: [email protected]


 

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