Authors: Narada Kumara

On 10 November 2017, the Indonesian government issued Government Regulation No. 46 of 2017 on Economic Instruments in Environmental Matters (“GR 46/2017”), which came into effect on the same date. GR 46/2017 was issued as the implementing regulation of Articles 42 and 43 of Law No. 32 of 2009 on Environmental Protection and Management.

Environmental economic instruments are a set of economic policies designed to encourage each stakeholder to carry out an effective and efficient environmental management and boost public compliance with precautionary principles and environmental sustainability in Indonesia. In principle, GR 46/2017 provides a reward for any party that preserves and protects the environment; and on the other hand, punishment/liability for any party that causes pollution or damage to the environment.  It is hoped that the implementation of GR 46/2017 will create a balance between the utilization of natural resources and environmental protection and management.

There are three environmental economic instruments under GR 46/2017, namely: i) economic activities and development planning; ii) environmental funding; and iii) incentive and/or disincentive; all of which are divided into sub-instruments.

We set out below several key sub-instruments of the environmental economic instruments.

Compensation/Reward

Based on Article 10 of GR 46/2017, the government will grant compensation/reward to any party that provides environmental services (provider) to protect and preserve the environment, among others:

1. water system protection;
2. biodiversity protection;
3. carbon absorption and storage;
4. preservation of natural beauty; and/or
5. other environmental services (including natural resources provisioning, environmental and natural regulation, and preservation of cultural values; also includes, among others, waste storage/stockpiling and waste purifier services or sink).

In addition, it is to be noted that compensation/reward shall be implemented based on an underlying cooperation agreement between the government and environmental services provider.

Environmental Guarantee Fund

In principle, GR 46/2017 obliges any party/activities causing pollution or damage to the environment to provide environmental guarantee funds, of which the fund shall be used by the government to restore the damaged and/or polluted environmental quality. The forms of guarantee funds, among others, are reclamation guarantee fund, post-mining guarantee fund and hazardous waste management insurance.

Article 22 paragraph (1) of GR 46/2017 stipulates that the guarantee funds shall be provided in the forms of time deposit, joint account, bank guarantee, insurance policy and/or other forms in accordance with prevailing laws.

Please note that some of the guarantee funds are not new, since in practice, several forms of the guarantee fund have been implemented by the government before, among others:

1. environment pollution insurance, which applies to a waste management company based on Article 8 of Minister of Environment Regulation No. 18 of 2009 on Licensing Procedures of Hazardous Waste Management; and
2. reclamation guarantee fund and post-mining guarantee fund, which applies to a mining company based on Minister of Energy and Mineral Resources Regulation No. 7 of 2014.

Incentive

In order to encourage environmental protection and sustainability, GR 46/2017 adopts the economic benefit approach. Based on Article 31 paragraph (2) of GR 46/2017, the government will grant certain incentives/benefits for parties (including company) with activities involving positive impacts to the environment, among others, as follows:

1. liability relief;
2. convenience and/or allowance of requirements for activities;
3. facilities and/or assistance;
4. encouragement and guidance;
5. recognition and/or award; and/or
6. public announcement to acknowledge positive performance.

GR 46/2017 does not mention the specific form of incentive which will be granted by the government. In addition, based on information we gathered from a relevant government institution, implementation of Article 31 paragraph (2) of GR 46/2017 is still pending to issuance of its implementing regulation. However, although its implementation is still pending, in principle there are similar forms of incentives which are already regulated under other regulations, e.g. exemption of import duty for waste producer company and waste management company based on Minister of Finance Reg. No. 101/PMK.04/2007 on the Exemption of Duty on Equipments and Materials Used to Prevent Environment Pollution.

Tax

Pursuant to Article 38 of GR 46/2017, the government will apply provincial taxes (pajak pusat) and district/local taxes (pajak daerah) to any party with business and/or activities utilizing natural resources, among others, related to the utilization of groundwater, surface water, edible bird’s nest, non metal and rock, motor vehicle fuel and motor vehicle.

In principle, such provision is similar with and already implemented by the government, according to Article 2 of Law No. 28 of 2009 on Local Tax and Retribution (“Local Tax and Retribution Law”). Therefore, in principle there are no new types of taxes (i.e. environmental tax) under GR 46/2017. Nevertheless, GR 46/2017 sets out environmental impact criteria, which as a result, by a business or activity, would affect the basis of tax charge (dasar pengenaan pajak). However, at the moment, there are no clear mechanisms on how the government will implement it.

Retribution/Levies

In addition to taxes, based on GR 46/2017, the government also imposes general services retribution (Retribusi Jasa Umum) to a waste producer company that use services, facilities and infrastructure for waste management provided by the government. Similar to taxes, such general service retribution has been stipulated by the government under Local Tax and Retribution Law.

Under GR 46/2017, the government will charge retribution tariff based on the amount of services utilized. In addition, Article 40 paragraph (3) of GR 46/2017 also authorizes the government to charge retribution tariff on a progressive basis according to the characteristic and volume of the waste garbage produced by parties/activities. However, GR 46/2017 does not provide a clear mechanism on how the government will implement it.

Award/Appreciation

The government also provides an award/appreciation to any party that contributes to environmental protection and management. Pursuant to Article 50 paragraph (1) of GR 46/2017, the government will grant such award/appreciation in the form of money and/or other forms of appreciation. However, based on information we gathered from a relevant government institution, granting of the award under GR 46/2017 is still pending for the issuance of its implementing regulation.

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“The Author would like to acknowledge the contribution of our Junior Associate Fadhli Ramadhan Suryana in preparing this Legal Alert.”

Dear valued Clients and Colleagues,

Greetings from Budidjaja International Lawyers.

In line with our commitment to provide excellent services, we would like to proudly announce the arrival of our newest member Mr. Dimas Agung Hendarto. Dimas is joining Budidjaja International Lawyers as a Strategic Associate.

Prior to joining Budidjaja International Lawyers, Dimas had worked in a number of law firms. He was previously the Managing Partner of a mid-sized law firm.

With years of legal experience, Dimas has previously represented various business sectors, including but not limited to insurance companies, banking companies as well as tech and app companies. He had assisted clients in business setup, compliance, cour monitoring & support, debt recovery, government affairs, intellectual property protection, investigation, and private client & property.

Dimas had also represented clients in proceedings before the Indonesian National Board of Arbitration (Badan Arbitrase Nasional Indonesia/BANI) as well as the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha/KPPU). Dimas has also been exposed to investigative work during his tenure of service at an investigation firm, which provides investigative service for high profile clients.

Dimas earned his Bachelor of Law Degree from one of the prominent law school in Jakarta, Indonesia, majoring in Corporate and International Law, and graduated He is also currently undertaking a Master’s Degree in Trade, Investment, and Competition Law from Pelita Harapan University.

In addition to his Bachelor and Master Degrees, Dimas had also attended education at Taylors College of Melbourne, Australia as well as the Western Academy of Beijing in China.

We are confident that Dimas’ expertise and skills in handling legal matters will enable Budidjaja International Lawyers to render more high valued services to our esteemed clients.

Dear valued Clients and Colleagues,

Greetings from Budidjaja International Lawyers.

In line with our commitment to provide excellent services, we would like to proudly announce the arrival of our newest member Mr. Anthony Winza Probowo. Anthony will be joining Budidjaja International Lawyers as a Senior Associate.

Anthony graduated from the Faculty of Law of Pelita Harapan University, majoring in Business Law. During his studies, He was actively involved in and had won various national legal debate competitions.

In addition to his Bachelor of law Degree, Anthony also held a Master of Laws (LL.M.) degree from Georgetown University Law Center (Washington, D.C.).

Anthony has previously represented a number of prominent companies including major banking companies, large manufacturing companies, and plantation companies. He had also assisted major accounting firms in providing legal arguments in civil review cases.

We are confident that Anthony’s expertise and skills in handling legal matters will enable Budidjaja International Lawyers to render more high valued services to our esteemed clients.

Budidjaja international lawyers is proud to inform that our senior associate, Mr. Bama Djokonugroho, had recently taken part as one of the speaker in the 2nd SCMA India arbitration conference, held in Mumbai, India, by the Singapore Chamber for Maritime Arbitration (SCMA).

The SCMA[1] is an independent body, which was established to provide a framework for maritime arbitration which is responsive to the needs of the maritime community. The SCMA has members drawn from all sectors of the maritime community and from all countries.

The 2^nd SCMA India arbitration conference has gathered distinguished international legal practitioners to discuss and share their experiences in enforcing arbitral awards in key jurisdictions, such as Indonesia, India, Singapore, Malaysia, Hong Kong and China. In this event, Mr. Bama delivered a presentation on procedures and practical problems for the enforcement of foreign arbitral awards in Indonesia.

The event was a major success and was attended by more than 60 participants who showed keen interests to explore business opportunities in Indonesia jurisdiction.

[1] https://www.scma.org.sg/about_us.html

Authors: Juni Dani, Edly F. Widjaja

On 1 November 2017, the governors of provinces in Indonesia announced their respective Provincial Minimum Wage (Upah Minimum Provinsi or “UMP”) increment for 2018. The incremental amount of the UMP was made in reference to the Circular Letter of the Ministry of Manpower No. B.337/M.NAKER/PHIJSK-UPAH/X/2017 dated 13 October 2017 concerning Dissemination of National Inflation Rate Data and Gross Domestic Product Development of 2017.

The letter bases its calculation on national inflation and national economic development (the development of Gross Domestic Product or “GDP”) data as the UMP formula in accordance with the Government Regulation No. 78 of 2015 concerning Wages. This year, according to the letter issued by the Chairman of Central Statistics Body of Republic Indonesia (Badan Pusat Statistik Republik Indonesia) No. B-188/BPS/1000/10/2017 dated 11 October 2017, national inflation is 3.72% and GDP development is 4.99%. As a result, the percentage of UMP increment is 8.71% and shall be applied to all provinces in Indonesia except for provinces that are willing to set a higher percentage.

The table below lists the comparison for this year’s UMP with new UMP set for 2018 by all provinces in Indonesia:

As can be seen from the above table, the highest UMP is set by the DKI Jakarta Province (i.e. IDR 3,648,035 or approximately USD 270) while the lowest UMP is set by the Special Region of Yogyakarta (IDR 1,454,154 or approximately USD 108).

Pursuant to the Minister of Manpower and Transmigration Regulation No. 7 of 2013 concerning Minimum Wages, the governors may also determine a higher City Minimum Wage (Upah Minimum Kota or “UMK”) based on the recommendation and input from the Provincial Wage Council (Dewan Pengupahan Provinsi) and the mayor or regent. Major cities such as Tangerang, Bandung, Surabaya, or Batam usually have a higher minimum wages than what is stipulated under the UMP. The stipulation of the UMK must be determined at the latest by 21 November 2017.

The new UMP and UMK shall be valid starting from 1 January 2018.

Budidjaja International Lawyers would like to proudly announce that we have won the Dispute Resolution Boutique Law Firm of the Year 2017 presented by Asian Legal Business.

The awarding event was held on Thursday, 26 October 2017 at Hotel Indonesia Kempinski. Representing Budidjaja in the event was our Senior Partner Ms. Juni Dani and Partner Mr. Jono Yeo.

On this joyous moment, we would like to thank all of our valued clients, for your trust in our services which have allowed us to win the award. The award will also serve as an encouragement for the firm to keep on providing and improving our high-quality legal services in accordance with our value of Excellence, Integrity, and Reliability.

Budidjaja International Lawyers is proud to announce that our Senior Partner Mr. Tony Budidjaja took part as one of the speakers in the International Association of Defense Council (IADC) Regional Meeting 2017 event. The event will be held in Hong Kong on Thursday, October 19 to October 20, 2017.

Mr. Tony Budidjaja delivered a presentation on legal updates within the Southeast Asia region, specifically Indonesia.

Mr. Tony speaks on recent improvements o the Indonesian Litigation system. The presentation covers the Chairman of the Supreme Court Decree No. 43/KMA/SK/II/2017 on Establishment of Working Group to Enhance the Ease of Doing Business, and the recent simplification of Court Decision Format.

In addition to legal updates, the event also highlighted Comparative Legal Discussions on Witness Preparation in IADC members’ jurisdictions and Comparative Pre-Trial Procedures in Asia. The event also highlighted Investment Arbitration as a new and emerging field of practice.

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.

2. 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.

3. 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.

On September 29 and September 30, 2017, Budidjaja International Lawyers held its annual retreat program at Jambuluwuk Resort in Bogor, West Java. The event was held as part of the firm’s organizational development agenda and to strengthen the bond between its members.

The event was focused on providing sessions aimed at character development for BIL members and was held in cooperation with Power Character. BIL is grateful that we can have the support of DR. Jakoep Ezra, a renowned character specialist and expert in Human Resources Character Management, and the founder of Power Character.

In the event, the firm’s members engage in fun outdoor activities that illustrate values essential in achieving the company’s goals and in developing a character of professionalism.

During the event, BIL Senior Partner Mr. Tony Budidjaja also took the stage to socialize the firms’ new Vision, Mission, and Culture to all of the firm’s members.

Members of the firm also showcased their ability and entertainment skill by holding performances ranging from poetry reading to presenting a drama.

Dear Valued Clients and Colleagues,

We are pleased to announce that Budidjaja International Lawyers has been nominated for the Asian Legal Business Indonesia Law Awards 2017. Budidjaja has been nominated in several categories along with other top Indonesian firms. The categories the firm is listed in are as follows:

• Firms Categories
  • Banking and Financial Services Law Firm of the Year
  • Labour and Employment Law Firm of the Year
  • Technology, Media and Telecommunications Law Firm of the Year
  • Maritime Law Firm of the Year
  • Dispute Resolution Firm of the Year
  • Litigation Law Firm of the Year
  • Projects, Energy, and Infrastructure Law Firm of the Year
  • Restructuring and Insolvency Law Firm of the Year
  • Indonesia Deal firm of the Year

• Individual Categories
  • Woman Lawyer of the Year: Juni Dani – Budidjaja International Lawyers
  • Managing Partner of the Year: Tony Budidjaja – Budidjaja International Lawyers

Details on the award nominations can be viewed here
 

The Asian Legal Business Indonesia Law Awards 2017 event will be held on October 26, 2017, at the Hotel Indonesia Kempinski.

On September 18 until September 21, 2017, Budidjaja International Lawyers’ Senior Partner Juni Dani took part at the 30^th LAWASIA Conference held in Japan. The three days annual event is the flagship and main highlights of the association that incorporates lawyers, judges, jurists, and legal organizations across the Asia-Pacific region.

The Conference engages its participants, which includes bar leaders, corporate members and individual lawyers from across the Asia Pacific, in discussions related regional development of law on a wide range of issues starting from judicial practices to cross-border dispute resolutions.

The event was also attended by a number of representatives from various United Nations Offices and Institutes as speakers.