What It Means for Foreign Investors, Property Owners, and Cross-Border Transactions
Indonesia is preparing a major shift in how it handles cross-border legal matters.
A new Draft Bill on Private International Law has been included in the 2026 Priority National Legislation Program, and if passed, it will fundamentally modernize how foreign-related disputes, contracts, and court decisions are treated in the country.
This is not just a legal technicality. For investors, developers, and international businesses operating in Indonesia—especially in markets like Bali—this is a structural change that could significantly improve legal certainty.
Why This Matters Now
For decades, Indonesia’s private international law framework has relied on fragmented, colonial-era regulations that were never designed for today’s globalized economy.
As cross-border transactions increase—foreign ownership structures, international contracts, offshore financing—this gap has become more visible. This Draft Bill is Indonesia’s response.
The Three Big Shifts
1. Clearer Rules on Which Law Applies
The Draft Bill introduces a more flexible and modern approach to determining applicable law:
▪ Personal status: Moves beyond rigid nationality rules to include habitual residence and “closest connection”
▪ Contracts: Prioritizes party autonomy—you can choose which law governs your agreement
▪ Property: Maintains location-based rules, but now includes intangible assets like IP and digital assets
In practical terms: Well-drafted contracts will matter more than ever—and poorly drafted ones will become riskier.
2. Defined Jurisdiction of Indonesian Courts
The Draft Bill introduces clear criteria for when Indonesian courts can hear international disputes. Courts may take jurisdiction if there is a sufficient connection, such as:
▪ Defendant located in Indonesia
▪ Contract performed in Indonesia
▪ Asset located in Indonesia
▪ Dispute arises in Indonesia
At the same time, courts can decline jurisdiction if:
▪ A foreign court is agreed upon
▪ Arbitration is chosen
▪ The case is already being handled abroad
▪ The matter conflicts with Indonesian public policy
This is a major step toward predictability in dispute resolution.
3. Recognition of Foreign Court Judgments (Game Changer)
Historically, foreign court judgments were not directly enforceable in Indonesia. The only workaround was to re-litigate the case locally. This Draft Bill changes that.
It introduces a formal mechanism where foreign judgments can be:
▪ Recognized
▪ And in some cases, enforced
Through a Supreme Court exequatur process. However, enforcement will require:
▪ Reciprocity between countries
▪ Final and binding judgment
▪ Proper documentation and translation
▪ Approval from Indonesia’s Supreme Court
This is a major step toward aligning Indonesia with global legal systems.
What This Means for Bali’s Investment Market
This reform directly supports a broader trend we’re already seeing: The market is formalizing.
▪ Contracts will be scrutinized more closely
▪ Jurisdiction clauses will become critical
▪ Cross-border disputes will become more structured
▪ “Paper compliance” strategies will become less viable
For foreign investors, this is good news—but only if your structure is properly set up.
The Real Risk: Contracts Without Strategy
Many investors still rely on:
▪ Generic agreements
▪ Poorly defined jurisdiction clauses
▪ Misaligned ownership and operational structures
Under this new framework, those weaknesses will become visible—and enforceable.
Key Takeaways
▪ Indonesia is moving toward a modern, integrated legal framework for international transactions
▪ Foreign judgments may soon be enforceable—under strict conditions
▪ Contract drafting and jurisdiction strategy will become critical risk factors
▪ Legal certainty is improving—but only for those properly structured
How Seven Stones Can Help
At Seven Stones, this is exactly where we operate:
▪ Structuring cross-border investments
▪ Drafting contracts aligned with Indonesian and international enforceability
▪ Advising on jurisdiction and dispute resolution strategy
▪ Ensuring your setup works in practice—not just on paper
Final Thought
This Draft Bill is part of a bigger shift: Indonesia is not closing its doors to foreign investors. It is raising the standard for how they operate.
And in markets like Bali, where international capital and local regulation intersect daily, that shift will separate structured investors from exposed ones.