Legal Alert: Environmental Pollution and Damage from Shipping Activities in Indonesia, Salient Legal Provisions and Potential Risks

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Authors: Bama Djokonugroho, Stefanny O. Simorangkir

After the celebration of Indonesia’s Independence Day, on 23 August 2017, the Central Jakarta District Court finally opened the first court hearing involving a tort civil claim lodged by the Indonesian Ministry of Environment (“MoE”) against The Petroleum Authority of Thailand Exploration and Production Australasia Ashmore Cartier Pty Ltd, (“PTTEP Australasia”), The Petroleum Authority of Thailand Exploration and Production Public Company Limited, as well as The Petroleum Authority of Thailand Public Company Limited, in connection with the explosion of a rig operated by  PTTEP Australasia in the Montara oil field in East Nusa Tenggara back on 21 August 2009, which caused oil and gas to spill into the surrounding waters.

The MoE requested the Court to declare that PTTEP Australasia has committed a tort or unlawful act with strict liability towards the damages caused. The MoE claimed for material compensation, approximately IDR 23 trillion (around USD 1.7 million), for losses in connection to damages to the mangrove forest, seagrass and coral in affected areas. The claim showed that the Indonesian government is committed to handling environmental damage cases and will seek immense compensation from the perpetrator.

Legally, environmental pollution and damage in Indonesia are regulated under Indonesian Law No. 32 of 2009 regarding the Protection and Management of Environment (“Environmental Law”) and Law No. 32 of 2014 concerning Maritime (“Maritime Law”). Further, environmental pollution and damage, arising specifically from shipping activities,  also regulated under Indonesian Law No. 17 of 2008 concerning Shipping (“Shipping Law”), Government Regulation No. 21 of 2010 concerning Protection of Maritime Environment (“GR 21/2010”) and Ministry of Transportation Regulation No. PM 29 of 2014 concerning Prevention of Pollution on Maritime Environment (“PM 29/2014”).

We discuss below the salient provisions of Indonesian law related to environmental pollution and damage that shipping businesses may want to take note of.

1. Definition of Environmental Pollution and Environmental Damage

The Maritime Law and Environmental Law provide similar definitions on environmental/marine pollution, as follows:

Article 1 paragraph 14 of Environmental Law and Article 1 Number 11 of the Maritime Law

Environmental (marine) pollution is the inclusion of living creatures, substance, energy, and/or other components naturally or intentionally into the environment (marine area) because of human activities, of which has exceeded the stipulated environmental quality standard.”

For the definition of environmental damage, the Environmental Law and Maritime Law provide a slightly different definition, as follows:

Article 1 paragraph 16 of the Environmental Law 

Environmental damage is an act that cause direct and/or indirect change of physical, chemical and/or biological condition of environment that exceeded the standardized criteria of environmental damage”

Elucidation of Article 50 letter d of the Maritime Law

(Environmental) Damage means a direct/indirect change of marine physical, chemical, and/or biological condition detrimental to the marine resources, human health and other marine activities.”

2. Responsibilities and Liabilities of the Vessel’s Masters, Crews and Shipowners

In principle, the Environmental Law stipulates that every person in charge of a certain business and/or activity who commits an unlawful act related to environmental pollution and/or damage that may harm other people or the environment shall be obliged to pay compensation and/or take a specific action. In particular, any person who deliberately commits an act causing the surpass of quality standard of ambient air, water, sea water or standard criteria for environmental damage will be imposed with imprisonment for 3 (three) years at the minimum and 10 (ten) years at the maximum and a fine amounting to IDR 3 million at the minimum and IDR 10 million at the maximum.

Meanwhile, the Shipping Law, GR 21/2010 and PM 29/2014 stipulate responsibilities of the Master/Crews/Owners, inter alia:

 

3. Potential Risks

  1. Criminal Sanction

As described above, violation of provisions related with environmental pollution and damage shall be imposed with criminal sanction. In such cases, pursuant to the Environmental Law and MoE Regulation No. 02 of 2012 concerning Organization and Management of Government Environment Investigators (Penyidik Pegawai Negeri Sipil Lingkungan Hidup), Government Investigators from the Regional Environment Agency (Dinas Lingkungan Hidup dan Kebersihan Daerah) where the pollution occurred may conduct investigation upon the allegation of environmental pollution and damage, which subsequently followed by criminal court proceedings, if there is sufficient preliminary evidence that the suspect (e.g., master and/or crew of the vessel or any person in charge of activities of other units on the water) has breached the applicable laws and regulations.

  1. Compensation claim through an Alternative Dispute Resolution or Civil Claim

Based on the Environmental Law, the Indonesian government or the Ministry of Environment or regional government, class representative (if there are common facts or events, legal basis and type of compensation claim within the society) or an environmental organization may request the  person in charge of the company and/or activity that caused environmental pollution and damage to provide compensation for any losses  incurred  from the event through alternative dispute resolution (e.g. mediation or arbitration) or litigation/civil claim.

It is to be noted that the alternative dispute resolution forum will not apply for environmental pollution and damages that are classified as a criminal act under the prevailing regulations, including the Environmental Law and Shipping Law.

Moreover, aside from alternative dispute resolution, environmental disputes may be resolved through a civil claim on the ground of unlawful act. The procedure of such civil claim is in accordance with the procedure of a general civil claim under the Indonesian Civil Procedural Law.

The amount of compensation claim caused by environmental pollution and damage shall be calculated in accordance with the Ministry of Environment Regulation No. 7 of 2014 concerning Compensation for the Environmental Pollution and/or Damage (“MR 7/2014”).

It is worth noting that the compensation amount calculation based on MR 7/2014 is a preliminary compensation amount. The final compensation amount will be determined by the consent of the parties in the forum of alternative dispute resolution or by the final and binding court decision. Enforcement procedure of compensation payment is the same with the enforcement procedure of a final and binding court decision and such payment will be served as a Non-Tax State Revenue.

  1. Vessel Arrest and Suspension/Revocation of Port Clearance

Aside from the above, damages to the environment caused by vessels are listed as one of the grounds of maritime claims in Indonesia pursuant to the elucidation of Article 223 of the Shipping Law which provides that the competent Court may issue an order to arrest a vessel in a civil case related to maritime claims without needing to undergo a civil proceeding.

Moreover, referring to Article 219 paragraph (3) of Shipping Law, any failure to comply with the obligation to meet the requirements of pollution prevention, safety management and pollution prevention from vessels with certain types and sizes, as well as failure to fulfill seaworthiness (which includes prevention of oil pollution from the vessel) may result in the suspension of the issuance or the revocation of Port Clearance for the related vessel.

4. Notes and Recommendations

It is worth noting that every vessel’s crew must take the effort to prevent and mitigate the occurrence of environmental pollution and damage originating from or caused by the related vessel. In addition to the obligation to report to the Harbor Master and/or other nearest government institution, the vessel’s crews, including the Master or person in charge of activities of other units on the water, shall also be obliged to immediately contact the local agent and Protection and Indemnity (P&I) Club Correspondence during the potential occurrence and/or the occurrence of environmental pollution from the vessel.

Generally, the authorities will also become more lenient to the perpetrator, in the event they find that prompt actions and best efforts to mitigate the occurrence of environmental pollution and damage were taken by the perpetrator. Further, such actions may also minimize risks of being imposed by a criminal sanction, civil claim and/or arrest of vessel.

In relation to the MoE’s claim in the Montara Case, the Indonesian district courts usually aim to issue judgments no later than six months after the registration of claims. Hence, considering the domicile of the parties and general practice, it may take a long time for the court to resolve the dispute. We shall see the progress of the court proceedings and whether the Central Jakarta District Court will order PTTEP Australasia to pay the long-awaited compensation related to the case.

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