Tue, 04 Sep 2001

A lesson from the LoI

In scrutinizing the distinctive features of the Letter of Intent (LoI) recently concluded between the government of Indonesia and the IMF, particularly as far as its being a legal instrument is concerned, the following characteristics should be noted by a student of law.

First, regarding the signatory parties, they are not only the Indonesian government and the IMF, but Bank Indonesia (BI) also constitutes a party in itself. However, although the signatory parties are evident as comprising the government and BI on the one side and IMF on the other, thus signifying a bilateral relationship between them, nevertheless this image of the bilateral nature of the undertaking has been impaired.

Suddenly we face phrases in paragraph 4 of the LoI referring to the use of the personal pronoun "we". For instance, phrases like "we have sought the views of an independent panel of experts" and "we are developing a set of amendments to the central bank law" are cases in point. Obviously, the reference to the personal pronoun "we" belies the bilateral nature of the memorandum, a term representing the LoI as stated in paragraph 1.

So, instead of supposedly reflecting the bilateral nature of commitments being exchanged between the government and BI on one side and IMF on the other, the use of personal pronoun "we" suggests a unilateral pledge being made by the Indonesian signatory parties, the government and BI, vis-a-vis the IMF. This is an interesting point to note.

Another interesting feature is the reference to the House of Representatives, as stated in some paragraphs of the LoI to be made subject to the qualification of "consultation with the House".

It must be clear that as far as the IMF is concerned, such consultative status being accorded to the House will have neither legal effect nor impairment to the binding nature of the LoI as such. The consultative status of the House being specifically asserted in the LoI is meant to meet domestic political purposes at best.

However, the House in some instances can also exercise the role of approving the measures or modalities adopted by the government as exemplified by the provisions of paragraph 5 and 11 of the LoI. In this regard, the law says that the role of the House in such an instance shares the constitutive capacity in the creation of international agreements.

Now the purpose of this letter is to draw a lesson from an international agreement, in this case the LoI. The electorate in the general elections of 2004 must be aware that Indonesia needs good legislators, as the House is accorded both consultative status and constitutive (legal) capacity with respect to the government's undertakings with international organizations, as demonstrated by the LoI with the IMF.