The Constitutional Court (Mahkamah Konstitusi - “MK”) recently rendered Decision No. 18/PUU-XVII/2019 (“Decision 18/2019”) in relation to declaring the Article 15, Paragraphs (2) and (3) of Law No. 42 of 1999 on Fiduciary Security (“Fiduciary Security Law”) unconstitutional due to the fact that these provisions focused solely on protecting the rights of creditors and were prone to result in arbitrary actions from creditors towards debtors. 

In essence, Article 15 (2) of the Fiduciary Security Law stated that fiduciary security certificates have the same executorial titles as legally binding court decisions, while Article 15 (3) of the Fiduciary Security Law authorized fiduciary grantees to sell fiduciary objects in cases involving defaults by fiduciary grantors.
Through Decision 18/2019, the MK finally decided the following declaration:

1. The phrases “executorial title” and “equal to a legally binding court decision”, as set out under Article 15 (2) of the Fiduciary Security Law, shall be deemed unconstitutional if the foregoing does not mean that the execution of a fiduciary security certificate shall be implemented through the use of the same legal mechanisms and procedures as for the execution of a court decision if there is not an agreement as to what constitutes default and the debtor is reluctant to release the fiduciary object; and

2. The phrase “default”, as contained under Article 15 (3) of the Fiduciary Security Law, shall be deemed unconstitutional if the foregoing is not interpreted to mean that the occurrence of a default shall be based on an agreement of the debtor and creditor or through certain legal proceedings which ultimately determine that a default has occurred.

For further inquiries relating to Decision 18/2019, do not hesitate to contact us through [email protected] or [email protected].

Source : 'MK Redefines the Interpretation of Executorial Titles of Fiduciary Security Certificates and Defaults Relating to the Execution of Fiduciary Security', Indonesian Legal Brief, 10 January 2020, Accessed 18 February 2020, (www.hukumonline.com).