Mahendra Danny Setyoko Commercial Paper Law

1506790002 Comparative Study:Indonesia–Philippines

Faculty of Law Negotiation of Commercial Paper
KKI

Commercial Paper Law

Comparative Study on Commercial Paper law in

Indonesia and The Philippines

Negotiation of Commercial Paper

Mahendra Danny Setyoko

1506790002
Faculty of Law Universitas Indonesia
International Undergraduate Programme
Mahendra Danny Setyoko Commercial Paper Law
1506790002 Comparative Study:Indonesia–Philippines
Faculty of Law Negotiation of Commercial Paper
KKI
Commercial Paper Law
Assignment: Comparative Study of Commercial Paper Law in Indonesian
and Philippine
Negotiation of Commercial Paper

Commercial paper in general is a written contracts for the payment of money; by

its form, intended as a substitute for money and intended to pass from hand to
hand, to give the holder in due course the right to hold the same and collect the
sum due. In Indonesia pursuant to the Burgerlijk Wetboek (BW) and the
Wetboek van Koophandel (WvK) as it is the legal basis of commercial paper in
Indonesia, in these law, there is no clear definition of commercial paper, however
in some references regarding commercial paper, it refers to and explained that a
commercial paper is one of the types of commercial letters known or circulated
in the community, other than that are known as valuable letters. The difference
between commercial paper and valuable letters are simply focused on the
difficulty of the transfer or the levering process of the document. Moreover there
are some definitions of commercial paper as explained by legal experts,
according to HMN. Purwosutjipto, a commercial paper is a letter of proof of debt
claim, a right bearer, and also easily traded. In addition, according to Wiryono
Projodikoro a commercial paper is letters that shares the nature of cash, can be
traded, and may be redeemed into cash at a given time. Moreover, Emmy
Pangaribuan Simanjuntak adds the explanation of a commercial paper that a
paper is considered as a commercial paper is inside the paper listed the values
that are equal to the value of the underlying agreement; the purpose is to be able
to be negotiated or transferred. Therefore from those explanations, a commercial
paper is a letter of proof of debt claim and a right bearer, with the similar nature
as cash that has valuation that are equal to the value of the underlying
agreement, and is easily negotiated or transferred. Underlying agreement means
that the incurrence of the obligation to pay by issuing commercial paper is due to
the prior agreement between the parties, which agreement issues the obligation
to pay some money. Issuance of commercial paper is the exercise of the
obligation to pay, in other words, the agreement is a basic engagement
(perikatan dasar), without any basic engagement, it is impossible to issue
commercial paper. Thus, the issuance of the commercial paper is not a stand-
alone document apart from the basic engagement. In Indonesia, a commercial
paper is considered as intangible movable goods as a commercial paper is a form
of agreement between parties and according to Article 511(3) BW an agreement
and demands on the amount of money that can be collected or receivables, or the
intangible movable goods as a right are classified as movable object.

In the other hand The Philippines has their own legal basis on the commercial
paper, which is the ACT NO. 2031 year 1911 which is The Negotiable Instrument
Law of The Philippines (NIL). However, the definition of commercial paper in
Indonesia is shared in the Philippines, but there is no classification of what type
of object is a commercial paper pursuant to NIL of The Philippines as in
Indonesia a commercial paper is classified as intangible movable goods. The
types of object will eventually affecting the negotiation process of the
commercial paper.
Mahendra Danny Setyoko Commercial Paper Law
1506790002 Comparative Study:Indonesia–Philippines
Faculty of Law Negotiation of Commercial Paper
KKI

Negotiation of commercial paper is in the transfer phase of a commercial paper,

a transfer is when a person other than its maker or drawer voluntarily gives the
instrument to someone else in order to enable that party to enforce the
instrument, this process happens after the issuance and before the presentment
of payment of the commercial paper. In Indonesia the transfer of commercial
paper is stipulated in Article 613 BW as commercial paper is considered as
intangible movable goods and based on the availability, a receivable shall be
differentiated on bearer (Aan Toonder), on order (Aan Order), and on name (Op
Naam); which pursuant to Article 613 of the Civil Code, provides that,
Receivables on name (Oop naam), which means the name of the holder of right is
stated in the commercial paper, commercial paper on bearer (Aan Toonder),
which means the name of the holder of rights is not listed in the commercial
paper but the law requires who bring the commercial paper to demand the
transfer of money, and commercial paper of the on order (Aan Order), which
means the name of the holder of right is listed in the commercial paper plus the
column of words "or substitute". In the NIL of the Philippines the recognized
types of commercial paper is only commercial paper with on order and on bearer
clause in it as stated in the section 1 point d of NIL of the Philippines.

By that there are different process of negotiation for each type of commercial
paper, on name commercial paper needs to be assigned in Indonesia there is a
process called cessie. Cessie is the process of transfer of commercial paper on
name. Article 613 paragraph (1) and (2) of BW mention that transfer of accounts
receivable on name shall be done by making authentic or under-hand deeds
delegating rights to those goods to others and the transfer shall have no effect on
the debtor before the transfer is acknowledged by the debtor, assignment of
commercial paper is recognized in the NIL of the Philippines but there is no
specific regulation regarding the issue.

For on order paper the process is endorsement, this is the same regulation
between Indonesia and The Philippines, In Indonesia endorsement is stipulated
under article 613 point 3 BW in conjunction with article 110 to 116 WvK and in
NIL of the Philippines section 30 to 50. In both law, endorsement is the signature
of the payee, which is the original party at the back of the commercial paper with
the purpose of transferring the rights embedded in the commercial paper to
endorse. The types of endorsement include blank endorsement, special
endorsement, qualified endorsement, and restrictive endorsement. A blank
endorsement specifies to no endorsee, basically it is the conversion of on order
commercial paper to on bearer commercial paper as the bearer shall be entitled
to receive payment as payee unless otherwise agreed, any endorser shall have
the same liability as an acceptor of the commercial paper, and such liability for
payment. Therefore, when an instrument has been endorsed in blank, any holder
may convert it into special endorsement. By that moving on to the special
endorsement, special endorsement specifies the person to whom, or to whose
the instrument is to be payable, it designated the person to whom the instrument
is being transferred, for instance “payable to A or order” this special
endorsement has caused the instrument to be payable only to special endorsee.
Mahendra Danny Setyoko Commercial Paper Law
1506790002 Comparative Study:Indonesia–Philippines
Faculty of Law Negotiation of Commercial Paper
KKI
While the qualified endorsement is an endorsement that includes the clause
“without recourse” or in other word the endorser disclaims liability of the
endorser. The phrase “without recourse” means that if there is an event of
dishonor, the endorser do not have to pay the cost. Moreover, restrictive
endorsement is an endorsement with restriction notation in which it restricts
the further negotiation of the instrument, for instance “pay A only” it secures
payment only to it gives the endorsee the right to receive payment and to sue
any party thereto that the endorser could have sued, but gives the endorsee no
power to transfer the right to other people. Those are the types of endorsement,
however there is one more condition. There is possibility that an endorsement
contain conditions, t became a conditional endorsement as section 39 NIL of the
Philippines explained that in a case where an endorsement is conditional, the
party required to pay the instrument may disregard the condition and make
payment to the endorsee or his transferee whether the condition has been
fulfilled or not. But any person to whom an instrument so indorsed is negotiated
will hold the same, or the proceeds thereof, subject to the rights of the person
indorsing conditionally. Therefore the condition does not apply to the issuer or
the drawee, but is applied to the endorsement parties. This is the same
stipulation of conditional endorsement in Indonesia.

For on bearer commercial paper is negotiated by physical delivery. A real

transfer. On bearer commercial paper with characteristics of, which do not at all
point to the name of the creditor and the right of the commercial paper can be
executed by anyone who holds and shows the commercial paper. The same legal
principle is used in Indonesian law and Philippine law, moreover Indonesia used
Bezit or possession principle as stated in article 585 and 1977 BW that stated on
bearer commercial paper possession leads to the consideration of the legitimate
holder of it.

Therefore, from the commercial paper law of Indonesia which stipulated in

Burgerlijk Wetboek and Wetboek van Koophandel and The Philippine law with
the Act no. 2031 year 1911 about Negotiable Instrument Law is more or less the
same. The only difference is that in Philippines, there is no specific assignment
process for the on name commercial paper, in Indonesia there is cessie.
However, regardless of that by the nature of commercial paper itself that the
paper needs to be easy to be negotiated and shares the nature of that of a money
or cash, on name commercial paper may be disregarded as a negotiable
instrument, this makes both Indonesian and Philippine law even more similar,
there is no significant difference, only the name of the principle is difference as
for instance in Indonesia there is a bezit principle as in the Philippine only called
holder. Also, Indonesia does not have a specific law regarding the commercial
paper while the Philippines have a specific law governing commercial paper,
which is the Act 2031 year 1911, this is the only significant difference, but only in
the legal basis. Thus the conclusion that can be made after analyzing the
provisions that governs the negotiation of commercial paper from both legal
system, it can be said that both commercial paper law in Indonesia and in The
Philippines are very much alike.
Mahendra Danny Setyoko Commercial Paper Law
1506790002 Comparative Study:Indonesia–Philippines
Faculty of Law Negotiation of Commercial Paper
KKI