Implications of Pacta Sunt Servanda Principle in the Long Term Contract between the Indonesian Government and Pt Freeport Indonesia

Abstract

Contract of work executed by the Indonesian Government and PT Freeport Indonesia is binding for a long term according to pacta sunt servanda principle, as the contract term took a period of 30 years, but the analysis finds that many provisions of the contract bring in myriad of adverse impacts to the Government and weaken its position. It is very clear that the rights and liabilities of the parties contemplated in the contract are not fairly balanced. This applies as well to the benefits and proceeds being earned by both parties. Therefore in terms of common legal principles and legal doctrines such as good faith principle, unconscionality doctrine and unjust enrichment doctrine, the essence of pacta sunt servanda principle set out in the contract of work is not conclusive. This shifting essence of the phrase implies that the court has the right to alter and to interfere with the content of the contract and allows a judge to waive some clauses or the entirety of the contract as it may produce consequences that is contradictory to the judge’s conscience and justice.

Key words: Contract, Pacta sunt servanda, good faith