The Anti-Bribery and Anti-Corruption Review: Indonesia

Introduction

Indonesia has two main Laws that deal with bribery and corruption, namely Law No. 11 of 1980 on the Criminal Act of Bribery (the Anti-Bribery Law) and Law No. 31 of 1999 on the Eradication of Crimes of Corruption, as last amended by Law No. 20 of 2001 (the Anti-Corruption Law). Under these laws, bribery offences are formulated to cover bribery of officials having obligations or duties relating to the public interest (the Anti-Bribery Law) and public officials (the Anti-Corruption Law). Despite the existence of the Anti-Bribery Law, which appears to have a broader reach, prosecutions in Indonesia generally invoke the more recent Anti-Corruption Law. As such, the focus of anti-bribery and anti-corruption enforcement in Indonesia is bribery and corruption of public officials within the context of the Anti-Corruption Law.

The Anti-Corruption Law differs from anti-corruption legislation in other jurisdictions in many ways. For one thing, the Anti-Corruption Law does not criminalise bribery in the private sector. Although there is a provision criminalising bribery of attorneys, the law does not go beyond this provision in terms of regulating business-to-business corruption.

There is also no regulation prohibiting bribery of foreign public officials. Enacting a legal instrument on this subject is one of Indonesia's commitments to the United Nations Convention against Corruption 2003 (UNCAC) and G20 Anti-Corruption Working Group.2

With a significant amount of work still to be done to fully comply with the UNCAC, Indonesia's anti-corruption enforcement is still focused on the actions of public officials.

Domestic bribery: legal framework

i Elements of bribery

Unlike the US with its FCPA, Indonesia does not have legislation governing foreign bribery. All references to bribery in this article will, therefore, refer to domestic bribery.

In terms of legal framework, bribery is captured by the Anti-Bribery Law and the Anti-Corruption Law. However, in terms of enforcement, law enforcement agencies in Indonesia commonly invoke the more recent Anti-Corruption Law.

The Anti-Bribery Law has far fewer provisions than the Anti-Corruption Law. It consists of six articles and essentially stipulates that the giving and receiving of bribes is punishable. It also stipulates that the law has extraterritorial reach. Another difference from the Anti-Corruption Law is that the Anti-Bribery Law does not acknowledge corporate criminal liability. All the penalties set out in the law are only for individuals.

The act of bribery under the Anti-Bribery Law is defined in Article 2 as the act of giving or promising something with the intention to persuade the recipient to do or not to do something related to his or her duties that is contrary to their authority or obligations and that is contrary to the public interest. The sanction for violating this provision is imprisonment of up to five years and a fine of up to 15 million rupiahs.

The Anti-Bribery Law does not provide any definition of 'public interest', and, therefore, the law could be interpreted to apply to bribery given to officers of private entities, to the extent that the business involved touches on matters in the public interest (e.g., a private surveyor entrusted with verifying an applicant's eligibility to receive fiscal facilities from a government body).

According to the official elucidation of Article 2 of the Anti-Bribery Law, 'contrary to their authority or obligations' includes authorities and obligations stipulated under the relevant ethical codes or professional code of an organisation. This conceivably could include the internal policies or code of conduct of a private company.

Having said that, there has been no known prosecution of private bribery using the Anti-Bribery Law in Indonesia.

The receipt of a bribe is a criminal offence under Article 3 of the Anti-Bribery Law if the recipient knows or should know that the gift or promise they received was given with a corrupt intent. The sanction under Article 3 is imprisonment of up to three years and a fine of up to 15 million rupiahs.

The provisions concerning bribery of public officials under the Anti-Corruption Law can be found in Articles 5, 11 (receipt of bribe), 12 and 13. In addition to these provisions, the Anti-Corruption Law also criminalises bribery of judges and attorneys in Article 6.

The subjects of the Anti-Corruption Law are government officers and state administrative officials. For the purpose of this article, both government officers and state administrative officials will be referred to as public officials.

The central thrust of Article 5 is the corrupt offering of a gift (or gratuity) related to a specific action or non-action of the recipient government employee or state administrative official in contravention of the person's obligations or duty.

Article 13 of the Anti-Corruption Law sets out a broader formulation of the crime of bribery. It criminalises 'anyone who gives a gift or promise to a government employee in consideration of the power or authority attached to the recipient's office or position, or which the giver of the gift or promise assumes is attached to the office or position of the giver'.

The language of Article 13 does not specifically reference the intention of the gift giver to cause the government employee to do or not to do something that would be contrary to his or her obligations or duties. Nevertheless, the operative language is that the gift is given 'considering' or 'in consideration of' the government employee's office or position or what the gift giver assumes to be vested in that office or position. This language recognises implicitly that the giver is pursuing a quid pro quo, that is, the gift giver or promise maker hopes to gain something from the gift or promise, or that the gift or promise will result in (for him or her) an 'appropriate' use of the government's employee's power or authority.

ii Public officials

The Anti-Corruption Law has a broad scope of public officials. The terms used by the Anti-Corruption Law are government officials and state administrative officials.

Government officials include civil servants, government officials within the context of the Criminal Code, people who receive salary or wages from the state or regional government budget, people who receive salary or wages from a corporation that receives financial aid from the state or regional government budget and people who receive salary or wages from a corporation that utilises capital or facilities from the state or public.

State administrative officials are officials who perform the executive, legislative and judicative functions in state administration. This includes, among others:

  1. the president and the vice president;
  2. the chairman, vice chairman and members of the People's Consultative Assembly;
  3. the chairman, vice chairman and members of the People's Representative Council;
  4. the chairman, vice chairman and members of the Regional Representative Council;
  5. judges of the Supreme Court, Constitution Court and all other courts;
  6. officers of the Audit Board of Indonesia;
  7. officers of the Judicial Commission;
  8. the chairman and vice chairman of the Commission for Eradication of Corruption (KPK);
  9. ministers and ministerial level officials;
  10. heads of Indonesian representatives abroad holding the title of Ambassador Extraordinary and Plenipotentiary;
  11. governors and vice governors;
  12. regents, mayors, vice regents and vice mayors;
  13. other government officials as designated by the prevailing laws;
  14. members of the board of directors and board of commissioners as well as other structural officers of state-owned entities or regional government owned entities;
  15. heads of public universities;
  16. first echelon officers and first echelon level officers in the civil service, military and the Police Force;
  17. prosecutors;
  18. investigators;
  19. court clerks; and
  20. officers in a procurement project

iii General concept of gratuity

Article 12B introduces the concept of gratuity. The elucidation of Article 12B defines gratuity as any gift in a broad sense, including gifts of money, goods, discounts, commission, interest-free loans, travel tickets, lodging, travel tours, free medicine, and other facilities, whether received in Indonesia or abroad by whatever means.

It is important to note that Article 12B does not create a 'safe harbour' for gifts for routine governmental action or the like. Rather, it stipulates that every gratuity given to a public official potentially is a bribe, but to be an actionable crime it must be given with some connection to the public official's position and involve a quid pro quo by the recipient to do or not do something in contravention of his or her obligations or duties. In sum, there is 'corrupt intent' involved (i.e., intent to cause a misuse of office or to achieve a prohibited purpose, or both).

Article 12B also introduces an important evidentiary rule on who carries the burden of proving whether a gratuity is a bribe or not. Article 12B requires that the recipient of the gratuity provide proof that the gratuity given to him was not a bribe if the gratuity amounts to 10 million rupiahs or more.

If a gratuity involves a value of less than 10 million rupiahs, then the public prosecutor carries the burden of proving that the gratuity given was a bribe.

Article 12C may permit the recipient to avoid any form of prosecution in connection with receiving a gratuity if he or she reports the gratuity to the KPK in a timely manner. The KPK must then decide if the government employee can keep the gratuity or whether it belongs to the state.

The KPK issued a number of guidelines and regulations on gratuity that provide further guidance on identifying gratuity. The KPK essentially distinguishes gratuity into two categories, namely gratuities that must be reported (prohibited gratuity) and gratuities that are exempted from the reporting obligation (permissible gratuity). The KPK provides the following non-exhaustive list of prohibited gratuities:

  1. gratuities given for services to the public;
  2. gratuities given during the process of communicating, negotiating and implementing an event;
  3. gratuities given as a token of gratitude prior to, during or after a procurement process;
  4. gratuities given on religious holidays (e.g., food hampers or gift baskets given for Eid ul-Fitr or Christmas); and
  5. entertainment facilities, travel facilities or vouchers given during an event/activity which is irrelevant to the recipient's position

The KPK categorises permissible gratuities into two categories, that is, gratuities received in relation to an official function and those received not in relation to an official function (such as gifts from family members).

The KPK encourages all government institutions to enact their own gratuity guidelines and acknowledges that the restrictions set out in these internal guidelines may be stricter than the KPK's guidelines. As a result, all government institutions nowadays have their own regulations on gratuity, which essentially mirror the KPK's guidelines.

iv Corporate criminal liability

The Anti-Corruption Law acknowledges corporate criminal liability. This means that if corruption is committed by or on behalf of a corporation, criminal charges can be brought against the corporation or its management, or both. The scope of 'management' according to the Anti-Corruption Law includes the officers set out in the corporation's articles of association and anyone who has decision-making power in the corporation.

The main penalty imposed on a corporation is a fine. The amount of fine imposed on a corporation is the maximum amount imposed on an individual plus one third of that amount. Other penalties may include confiscation of assets, restitution, partial or full closure of business, and partial or full revocation of rights.

v Political contributions

Prevailing laws in Indonesia prohibit political candidates and political parties from receiving contributions for their campaign from foreign parties. The elucidation of Article 339 of Law No. 7 of 2017 on General Elections defines foreign parties as foreign citizens, foreign governments, foreign corporations, corporations in Indonesia with foreign majority ownership, foreign non-governmental organisations and foreign mass organisations.

This rule is reiterated in Regulation of the Commission for General Elections No. 24 of 2018 on Campaign Funds for General Elections.

Enforcement: domestic bribery

Enforcement of anti-bribery provisions in Indonesia is not limited to cases where the giver is an Indonesian citizen or entity. In cases where the giver of bribes is a foreign citizen or entity, KPK would pursue the investigation by utilising international cooperation with anti-corruption authorities in other jurisdictions.

A few notable cases are as follows.

In 2014, the Corruption Court found a member of the Indonesian parliament, Izedrik Emir Moeis, guilty of receiving bribes from executives of Alstom SA in exchange for securing a US$118 million electricity contract in Indonesia known as the Tarahan Project. Moeis was sentenced to three years of imprisonment and a 150 million rupiahs fine. KPK worked closely with the US Department of Justice in investigating Moeis.

In February 2020, the US Department of Justice announced that two former executives of Alstom's subsidiary in Indonesia and a former executive of Marubeni Corporation had been charged for their alleged participation in paying bribes to government officials in Indonesia for the Tarahan Project.3 The KPK has not issued any statement on this news.

In 2010 Innospec Ltd, a UK subsidiary of Innospec Inc, pleaded guilty to bribing officials of Pertamina, a state-owned oil and gas corporation. The bribes were given to secure a contract from Pertamina for the supply of toxic fuel additives. The bribes were paid through an agent, PT Soegih Interjaya.

The KPK was involved in a joint investigation with the UK's Serious Fraud Office (SFO) into the payment of bribes. In July 2015, the recipient of the bribes, Pertamina's director for processing, was sentenced to five years' imprisonment and a 200 million rupiahs fine. The director of PT Soegih Interjaya was found guilty of giving the bribes and sentenced to three years' imprisonment and a 50 million rupiahs fine.

In 2016 KPK initiated an investigation of a bribery case related to the procurement of airplanes and engines from Airbus SAS and Rolls-Royce PLC by PT Garuda Indonesia (Persero) Tbk, Indonesia's state-owned airline. The investigation was initiated following KPK's receipt of a report from the SFO and Singapore's Corrupt Practices Investigation Bureau (CPIB) regarding their investigation of Rolls-Royce. KPK then worked closely with the SFO and the CPIB.

In its investigation, KPK found that former president director of Garuda Indonesia, Emirsyah Satar, received bribes for the procurement process. The bribes were given through an intermediary, Soetikno Soedarjo, a beneficial owner of Connaught International Pte Ltd in Singapore.

The KPK subsequently found evidence that the case also involved money laundering, namely that Satar used some of the bribes he received from Soedarjo to purchase a home in Jakarta and an apartment in Singapore.

In 2020, the Corruption Court found Satar guilty of receiving bribes and committing money laundering, and sentenced him to eight years' imprisonment and ordered him to pay a 1 billion rupiahs fine. Satar was also ordered to pay S$2,117,315.27 to the state as restitution.

The Corruption Court also found Soedarjo guilty of bribery and money laundering. He was sentenced to six years' imprisonment and ordered to pay a 1 billion rupiah fine.

Foreign bribery: legal framework

Unlike the US with its FCPA, Indonesia does not have legislation governing foreign bribery.

Associated offences: financial record-keeping and money laundering

i Regulatory framework for financial record-keeping

The Anti-Corruption Law does not regulate financial record-keeping as one of the obligations relating to the prevention and eradication of corruption. There is also no obligation to disclose irregularities of records or suspicion of violation of the Anti-Corruption Law to law enforcement agencies. The Anti-Corruption Law formulates disclosure of potential violation of the Anti-Corruption Law as a right rather than an obligation.

Under the Anti-Corruption Law, the public may provide information on a potential crime of corruption to law enforcement agencies. The government can reward members of the public who contribute to the efforts to prevent and eradicate corruption or disclose potential violation of the Anti-Corruption Law. According to Regulation No. 43 of 2018, the reward can be in the form of a plaque or a monetary reward of up to 200 million rupiahs.4

Regulation on bookkeeping exists independently from the duties to prevent corruption, as set out in Law No. 8 of 1997 on Corporate Documents (the Corporate Documents Law). The Corporate Documents Law regulates retention of financial and accounting documents of companies and any supporting documents that may or may not be linked to the financial or accounting documents. Under the Corporate Documents Law, a company must retain financial documents for 10 years. These documents include:

  1. records: annual balance sheet, annual profit and loss statement, accounts, daily transaction journals or any written document containing information about the rights and obligations as well as other matters linked with business activities;
  2. bookkeeping evidence: documents used as the basis for bookkeeping and affecting changes in assets, liabilities and capital;
  3. financial administration supporting data: data that constitutes part of the bookkeeping evidence.

The Corporate Documents Law, however, does not provide any sanctions for non-compliance with the aforementioned obligation.

ii Anti-Money laundering

The principal anti-money laundering legislation in Indonesia is Law No. 8 of 2010 on the Prevention and Eradication of Money Laundering (the Anti-Money Laundering Law). The Anti-Money Laundering Law lists 26 predicate offences of money laundering. Among these offences are corruption and bribery.

The Anti-Money Laundering Law essentially regulates the following points:

  1. criminalisation of money laundering;
  2. obligations of the public as customers, the supervisory body and the reporting parties;
  3. the establishment of the Indonesian Financial Transaction Reports Analysis Centre (PPATK);
  4. law enforcement; and
  5. national and international cooperation.

The actions punishable by the Anti-Money Laundering Law are:

  1. the act of placing, transferring, spending, paying, granting, depositing, carrying abroad, converting, exchanging or any other act in relation to criminal act proceeds;
  2. the act of concealing or obscuring the origins, source, location, purpose, transfer or actual ownership of criminal act proceeds; and
  3. the act of receiving or controlling the placement, transfer, grant, donation, deposit exchange or other use of the criminal act proceeds.

As with the Anti-Corruption Law, the Anti-Money Laundering Law acknowledges corporate criminal liability. The main penalty that can be imposed on a corporation is a fine of up to 100 billion rupiahs. Other penalties may include announcement of the court's judgment, partial or full freeze of business activities, revocation of business license, closure or prohibition of corporation, confiscation of assets, or takeover by the state.

The Anti-Money Laundering Law and Government Regulation No. 43 of 2015 on Reporting Parties set out a reporting obligation for certain types of financial services providers, goods and services providers and professional services, defined as reporting parties. These parties are:

  1. financial services providers:
    • banks;
    • refinancing companies;
    • insurance companies and insurance brokerage companies;
    • financial institutions' pension funds;
    • securities companies;
    • investment managers;
    • custodians;
    • trusts agents;
    • postal agencies as provider of giro services;
    • foreign currency traders;
    • operators of card-based payment instruments;
    • e-money and e-wallet operators;
    • cooperatives carrying out credit savings;
    • pawn houses;
    • companies operating futures commodity trading;
    • money delivery service providers;
    • venture capital companies;
    • infrastructure financing companies;
    • micro-financial institutions; and
    • export-financing companies;
  2. other goods and services providers: property companies and agents; automotive traders; jewellery and precious metal traders; artistic goods and antique traders; and auction houses; and
  3. professional services providers: advocates (lawyers); notaries; land deed officials; accountants; public accountants; and financial planners.

Financial services providers are required to submit suspicious financial transaction reports, cash transaction reports and reports on transfer of funds from and to overseas accounts. The definition of a suspicious financial transaction under the Anti-Money Laundering Law is quite broad, and covers transactions:

  1. that deviate from the customer's profile, characteristics or transactions pattern;
  2. that are suspected to have been made to avoid being reported;
  3. done or cancelled using assets that are suspected of being criminal proceeds; and
  4. those requested by the PPATK to be reported because they involve assets suspected as criminal proceeds.

Professional services are also required to submit suspicious transaction reports to the PPATK. As for other goods and services providers, they are required to submit reports on transactions done by their customers with a value of at least 500 million rupiah or its equivalent amount.

To assist financial services providers and professional services providers in identifying suspicious transactions, the PPATK has issued a number of regulations and circular letters setting out indicators of suspicious transactions.

The Anti-Money Laundering Law does not require the predicate offences to be proven prior to conducting an investigation, prosecution and court hearing of a money laundering crime. If during an investigation the investigator finds sufficient preliminary evidence of a money laundering crime and its predicate offence, they will combine the investigation briefs of the two offenses and report them to PPATK.

Enforcement: foreign bribery and associated offences

As previously mentioned, the Anti-Money Laundering Law provides the basis for law enforcement agencies to consolidate their investigations if there is sufficient preliminary evidence of a money laundering crime and its predicate offence.

A recent example of this is the bribery and money laundering case involving the former president director of Garuda Indonesia discussed in Section III. During the investigation stage, KPK investigators found sufficient preliminary evidence of bribery and money laundering crimes. Satar was subsequently charged under Article 12B of the Anti-Corruption Law (receiving gratuity) and Article 3 of the Anti-Money Laundering Law. The Corruption Court later found him guilty of corruption and money laundering.5

Soedarjo, the giver of the bribes, was also found guilty of corruption and money laundering.6

International organisations and agreements

i United Nations Convention against Corruption

Indonesia signed the United Nations Convention against Corruption (UNCAC) on 18 December 2003. The convention was ratified on 19 September 2006 through Law No. 7 of 2006. However, Indonesia still has much to do to implement the provisions in the UNCAC. For one thing, Indonesia needs to establish legal instruments to prevent corruption in the private sector, as set out in Article 12 of the UNCAC.

Indonesia currently does not have a law that specifically criminalises corruption in the private sector. Steps have been taken to adopt measures in this area, such as the enactment of Presidential Regulation No. 13 of 2018 on the Implementation of the Principle of Identifying Beneficial Owners of Corporations for the Prevention and Eradication of the Criminal Acts of Money Laundering and Terrorism Funding (beneficial ownership regulation), which aims to increase transparency in the private sector, and the issuance of Guideline for the Prevention of Corruption for Corporations by the KPK (the Anti-Corruption Guideline for Corporations). However, there is still a lot of work to be done to fully implement Article 12 of the UNCAC.

ii International cooperation

Indonesia is also party to a number of mutual legal assistance (MLA) agreements to enhance international cooperation in handling criminal matters, such as asset recovery. These agreements were subsequently ratified into national laws. The following are some examples:

  1. Law No. 15 of 2008 ratifying the MLA signed with Brunei Darussalam, Cambodia, Laos, Malaysia, the Philippines, Singapore and Vietnam;
  2. Law No. 6 of 2019 ratifying the MLA signed with the United Arab Emirates;
  3. Law No. 10 of 2019 ratifying the MLA signed with Iran; and
  4. Law No. 5 of 2020 ratifying the MLA signed with the Swiss Confederation.

To implement its authority in preventing corruption, the KPK has also entered into a number of memoranda of understanding with anti-corruption authorities from other countries such as with the FBI (US), the Serious Fraud Office (UK), the Ministry of Supervision (China), the National Anti-Corruption Commission (Thailand) and the Ministries of Justice, Foreign Affairs and Interior and Kingdom Relations (the Netherlands).

Legislative developments

On 16 July 2020, the People's Representative Council (DPR) decided that it would prioritise the discussion and review of 37 draft bills in 2020.7 One of the draft bills included in the priority list is the draft Criminal Code, which sought to revise the currently prevailing Indonesian Criminal Code, a product of colonial times.

This is not the first time that the DPR has reviewed the draft Criminal Code. The draft has undergone a number of revisions since the 1960s, and proposals to adopt the draft Criminal Code have been around for almost a decade.

The latest available revision of the draft includes some provisions on corruption that currently exist in the Anti-Corruption Law. The draft intends to revoke these provisions from the Anti-Corruption Law. These provisions concern:

  1. the act of enriching oneself or another person or corporation that can cause state loss;
  2. the misuse of office to benefit oneself or another person or corporation that can cause state loss;
  3. the giving and receipt of bribery; and
  4. conspiring to commit, preparing for, attempting to commit and aiding corruption.

The proposed revision has been met with strong resistance from the public. One of the concerns raised is that the minimum penalty for some of these crimes is reduced by the draft Criminal Code. The critics see this as providing leniency for corruptors. For example, the penalty for the act of enriching oneself that can cause state loss under the Anti-Corruption Law is imprisonment of at least four years and a fine of at least 200 million rupiahs. Under the draft Criminal Code, the minimum imprisonment is reduced to two years and the fine to 10 million rupiahs. The draft Criminal Code also purports to revoke the death penalty imposed by this provision.

A second revision of the Anti-Corruption Law did not make it to the DPR's list of prioritised draft bills.

Other laws affecting the response to corruption

i Privilege

Attorney–client privilege is not a highly regulated subject in Indonesia. The principal rule is set out in Law No. 18 of 2003 on Advocates (the Advocates Law), which obliges attorneys to keep confidential everything that they obtain from their client as a result of their profession. Following this, only attorneys can raise the legal privilege defence, not their clients.

The Advocates Law also stipulates that attorneys' briefs and documents are protected from seizure or examination and that advocates are entitled to protection from wiretapping. However, this rule can be waived by law enforcement agencies in certain types of investigation such as in anti-corruption investigations.

ii Data protection

Indonesia is expecting a draft bill on personal data protection that is under discussion within the DPR. This draft bill, when enacted, will be the first comprehensive law on personal data protection in Indonesia. As with the draft Criminal Code, the draft bill on personal data protection is slated as one of the prioritised drafts for discussion this year.

Currently, the main law and regulations that address the use of an individual's private or personal information through electronic media are:

  1. Law No. 11 of 2008 as amended by Law No. 19 of 2016 on Electronic Information and Transactions;
  2. Government Regulation No. 71 of 2019 on the Implementation of Electronic Systems and Transactions; and
  3. Minister of Communications and Informatics Regulation No. 20 of 2016 on Personal Data Protection in Electronic Systems.

Collectively, these are the Data Privacy Laws.

As a general rule, any use of personal data (including collecting, processing, analysing, storing, displaying, announcing, transferring, disseminating, opening access to and deleting personal data) must be based on consent from the data owner. The consent must be in writing (effectively, express and opt-in consent), whether collected manually or electronically, and in the Indonesian language (although there is no prohibition of using a dual language format). Further, the consent must only be obtained after a complete explanation from the electronic system operators to the data owners on the intended use of the personal data.

The consent must be obtained by electronic system operators that obtain the personal data directly from the data owner. There is not yet a concept of 'data controller' and 'data processor' in the Data Privacy Laws (this will be included in the upcoming data protection law), so the consent obligation lies with the electronic system operators that have a direct relationship or communication with the data owners. The Data Privacy Laws only acknowledge the term 'electronic system operator', which is applicable for any party that:

  1. collects personal data directly from the personal data owners; and
  2. processes personal data on behalf of other electronic system operators.

With respect to conducting an offshore personal data transfer from Indonesia (not the other way around), apart from the consent requirement, an electronic system operator is also required to coordinate with the Ministry of Communications and Informatics (MOCI). This coordination requirement involves reporting the plan and results of the transfer to the MOCI and 'seeking advocacy' from the MOCI. The scope of this latter requirement is unclear, and at the time of writing the coordination requirement has not been enforced by the MOCI.

iii Labour Law

On 5 October 2020, the DPR approved the Job Creation Law, commonly known as the Omnibus Law. Following the approval, the DPR has seven days to deliver the approved Omnibus Law to the president for enactment.

The Omnibus Law amends more than 75 current laws, one of which is Law No. 13 of 2003 on Labour (the Labour Law). The law will require the central government to issue more than 30 government regulations and other implementing regulations that must be issued within three months of it being enacted. The discussion on the Labour Law below is set out based on the amendments proposed by the Omnibus Law and based on the draft of the Omnibus Law dated 5 October 2020.

The Labour Law refers to two main types of employment, namely indefinite period (i.e., permanent) employment and definite period (i.e., fixed-term) employment. The type of employment covered by these two main categories is determined based on the type of work, namely whether it is permanent or temporary in nature or whether the work can be completed within a certain period. The structure of the termination package applicable to each type of employment is quite different.

The termination payment paid to an indefinite period employee consists of severance pay, long service pay and compensation of rights.

An employee employed under a definite period employment agreement and terminated before the contract period expires is not entitled to a termination payment that consists of severance pay, long service pay and compensation of rights. Instead, a party that terminates a definite period employment agreement before its expiry (i.e., employer or employee) is obliged to pay to the other party compensation in the amount of the employee's salary until the end of the period of the definite period employment agreement.

The Omnibus Law introduces a new rule for definite period employment agreements. Upon expiration of the contract or conclusion of work set out in the contract, the employer must pay compensation to the employee. The amount of compensation will be determined based on the employee's period of work. Further details concerning the compensation rule will be set out in a government regulation.

Under the Labour Law, there is no unilateral termination of employment. Subject to certain very limited exceptions (e.g., during a probation period of the employee, due to employee's voluntary resignation or due to the employee reaching the retirement age), the general rule is that employers must first obtain a favourable decision on the termination of employment from the Industrial Relations Court or the Supreme Court (if a decision of the Industrial Relations Court is appealed by one or both of the parties).

Generally speaking, there is no significant change in the procedure for termination of employment. However, under the Omnibus Law, if termination cannot be avoided, the employer must notify the employee or the union, or both, of its intention and the reason for termination. If the employee or union disagrees with the termination, the matter will be processed according to the industrial dispute settlement procedure (governed by Law No. 2 of 2004 on Industrial Relations Dispute Resolution).

Employers are not required to provide notice of termination when the employment is terminated due to the employee's voluntary resignation, expiry of a definite period employment agreement, the employee reaching the applicable retirement age or the employee's death.

The Omnibus Law generally recognises all reasons for termination previously regulated under the Labour Law. However:

  1. the reasons for termination are no longer limited to those set out under the law because the Omnibus Law specifically states that an employment agreement, company regulations or collective labour agreement can set out other reasons for termination;
  2. the Omnibus Law specifically recognises a company's efficiency measures and a company being under a suspension of payment obligation as reasons for termination;
  3. the Omnibus Law does not specifically require the issuance of warning letters for termination due to an employee's violation of the employment agreement, company regulations or collective labour agreement; and
  4. instead of specifying employer conduct that an employee can use to initiate the termination of employment (e.g., assaulting the employee and not paying the employee's salary), the Omnibus Law generally provides that the employment can be terminated if the employer's conduct harms the employee.

Further requirements and procedures for termination of employment will be regulated under a government regulation.

Unlike the Labour Law, the Omnibus Law does not include specific provisions on termination payment formula that correspond with the reason for termination. However:

  1. the Omnibus Law still requires employers to pay employee severance pay, long service pay and compensation of rights in the event of termination. The previously regulated minimum calculation of severance pay and long service pay under Paragraphs (2) and (3) of Article 156 of the Labour Law are now the maximum amount of severance pay and long service pay under the Omnibus Law. Further, housing and medical compensation (which was calculated at 15 per cent of the total severance pay and long service pay) is no longer an element of compensation of rights; and
  2. further requirements on severance pay, long service pay and compensation of rights will be regulated under a government regulation.

Compliance

The importance of having compliance programmes is not covered in the Anti-Corruption Law. This subject was raised much later, although not expressly, in Supreme Court Regulation No. 13 of 2016 on Case Handling Procedures for Corporate Crimes (SC Regulation 13). SC Regulation 13 stipulates that in assessing a corporation's liability, judges can look at a number of factors. One of these factors is whether the corporation has taken measures to prevent the crime and its impact and ensure compliance with the law.

There is no further elaboration on this factor in SC Regulation 13 or any other regulation. In late 2018, the KPK issued its Anti-Corruption Guideline for Corporations, which contains guidance on establishing an effective anti-corruption compliance programme. However, the effectiveness of a compliance programme as a mitigating factor in sentencing for corruption crimes remains to be seen, as this defence has not been tested in court.

Outlook and conclusions

Indonesia still has a lot of work to do to realise its commitment to international efforts to combat corruption, such as the UNCAC and G20 ACWG. Enacting provisions such as criminalising bribery in the private sector seems to be challenging, as more than a decade after ratifying the UNCAC, the Anti-Corruption Law is still focused on corruption acts of public officials (with the exception of criminalising bribery of attorneys). However, there is some progress.

In 2016, the Ministry of Health issued Ministry of Health Regulation No. 58 of 2016 on Sponsorship of Healthcare Professionals (MOH Regulation 58) to curb the practice of giving improper gifts to healthcare professionals in exchange for their endorsement of certain products. The regulation was a product of a series of discussions between KPK, the Ministry of Health and the pharmaceutical industry.

MOH Regulation 58 restricts the types of sponsorship that can be provided to a healthcare professional. Furthermore, the regulation applies to all healthcare professionals, regardless of their employment status. Under MOH Regulation 58, doctors in private practice are subject to the same restrictions as their government-employed colleagues.

While it is still a far cry from actually including a provision on commercial bribery in the Anti-Corruption Law, MOH Regulation 58 could pave the way for other similar instruments.

Footnotes

Footnotes

1 Timur Sukirno is the firm chairman and head of the commercial dispute resolution practice group and Reno Hirdarisvita is a senior associate at HHP Law Firm.

2 Details of Indonesia's commitment are set out in a document issued jointly by KPK and the Ministry of Foreign Affairs (https://www.kpk.go.id/images/pdf/Buku-Komitmen-Global-Indonesia-pada-UNCAC-dan-G20-ACWG-2012-2018.pdf">https://www.kpk.go.id/images/pdf/Buku-Komitmen-Global-Indonesia-pada-UNCAC-
dan-G20-ACWG-2012-2018.pdf).

4 The implementation of this regulation, however, is not very straightforward. In a news article https://www.beritasatu.com/yuliantino-situmorang/nasional/644905/sejak-2016-baru-satu-pelapor-terima-hadiah-
premi-dari-kpk, KPK acting spokesperson Ali Fikri was quoted as saying that KPK faced a number of difficulties in implementing the regulation. One of the difficulties is to validate the information received from multiple reporters.

5 Decision of the Corruption Court at the Central Jakarta District Court No. 121/Pid.Sus-TPK/2019/PN.JKT.PST dated 8 May 2020. At the appeal stage, this decision was affirmed through Decision of the Jakarta High Court No. 19/Pid.Sus-TPK/2020/PT.DKI dated 16 July 2020.

6 Decision of the Corruption Court No. 122/Pid.Sus-TPK/2019/PN.Jkt.Pst dated 8 May 2020. At the appeal stage, this decision was affirmed through Decision of the Jakarta High Court No. 22/Pid.Sus-TPK/2020/PT.DKI dated 21 July 2020.

7 This number is a decrease from the previously announced 50 draft bills that the DPR had set out to review at the beginning of this year. According to the statement from the chair of the DPR's legislation body, Supratman, the covid-19 pandemic has caused the DPR to revisit the number of draft bills to be reviewed (https://nasional.kompas.com/read/2020/07/16/17104461/dpr-sahkan-evaluasi-prolegnas-prioritas-2020-ini-daftarnya?page=all">https://nasional.kompas.com/read/2020/07/16/17104461/dpr-sahkan-evaluasi-prolegnas-prioritas-2020-
ini-daftarnya?page=all).

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