Legal Review: Public-Private Partnerships in Indonesia

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The concept of Public-Private Partnerships (“PPP”) embodies one or more private parties comprising a consortium, commonly consisting of construction companies, operating companies and financiers that together undertake to finance and develop a project or asset for use by the government on behalf of the public and to be paid for over time. The types of projects and assets are normally infrastructure related and are of interest to investors because of the government’s support and guarantee of repayment.

The Government of Indonesian (the “GOI”) has put forward pro-PPP policies since early this millennium, although only a handful of projects have been completed successfully. In many cases, the work has been awarded to state-linked enterprises and may not be considered PPPs. That said, the GOI has evidenced its intent to improve the development of PPP projects in Indonesia by making them more appealing to investors.

Recent Regulations Read more »

Darrell Johnson of SSEK Moderates AmCham Seminar on New Indonesian Tax Amnesty Program

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Darrell R. Johnson, the senior foreign legal advisor at SSEK Legal Consultants, moderated a seminar organized by the American Chamber of Commerce in Indonesia on Indonesia’s new Tax Amnesty Law.

The seminar, “Tax Amnesty: How it Affects You and Your Company,” was held on Wednesday, August 24, and featured speakers from Ernst & Young and PricewaterhouseCoopers. The discussion focused on Indonesia’s new tax amnesty program and its impact on expatriates and foreign companies.

Darrell Johnson has resided in Indonesia for nearly 40 years. His expertise includes Indonesian finance, banking and capital markets law, foreign investment law, oil and gas law, mergers and acquisitions, insurance law and corporate and commercial law. He is a Governor of the American Chamber of Commerce in Indonesia.

SSEK Partner, Adviser Recognized as Leading Energy Lawyers for Indonesia

IEA and MDT

Ira A. Eddymurthy and Michael D. Twomey of SSEK Indonesian Legal Consultants have been recognized as leading energy lawyers in the 2016 edition of Who’s Who Legal: Energy.

Ira, a founding partner of SSEK, has extensive experience working with multinationals and large domestic companies on some of the biggest, most complex projects in Indonesia. Clients praise Ira as a “consummate expert” and laud her “sophisticated knowledge of Indonesian law” and her “comprehensive knowledge and understanding of the commercial aims of clients.”

In addition to energy, Ira is recognized by Who’s Who Legal as one of Indonesia’s leading lawyers for banking, mergers and acquisitions, and project finance. Ira is also recognized by Chambers & Partners as a leading lawyer for corporate/ M&A, by The Legal 500 for banking and finance, capital markets and corporate/M&A, by Asialaw for capital markets and corporate/M&A, and by IFLR1000 for banking, capital markets, corporate/M&A, energy and infrastructure, and project finance.

Michael is a senior foreign legal adviser at SSEK. He is extensively involved in major and highly complex transactions in the upstream and downstream oil and gas sectors, as well as the private power, mining and shipping sectors. He counts numerous successful projects to his name, including the development, financing and refinancing of oil and gas and mineral extraction and processing projects, private power projects, pipeline and gas projects, and other deals involving oil, natural gas and other natural resources. Read more »

Real Estate Disputes in Indonesia

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By Dyah Soewito and Denny Rahmansyah

“Real estate” is a very broad subject that touches many aspects of Indonesian law, e.g., administrative law, environmental law, construction law, civil law, agrarian/land law, etc. There is no arbitration facility or process specifically designed to accommodate real estate matters under Indonesian law. Disputes related to real estate are treated in a similar manner as any other dispute in Indonesia.

Concerning dispute settlement through arbitration, Indonesia has enacted Law No. 30 of 1999 regarding Arbitration and Alternative Dispute Resolution (“Arbitration & ADR Law”). Under the Arbitration & ADR Law, parties may resolve a dispute through arbitration only after they have agreed to arbitration as the dispute settlement mechanism. For agreements, including agreements related to real estate (e.g., construction agreements or lease agreements over building or office space), the parties will usually insert an arbitration clause if they prefer arbitration to settle any dispute arising from such agreements.

The most widely recognized national arbitration body in Indonesia is the Indonesian National Arbitration Board (Badan Arbitrase Nasional Indonesia or “BANI”). When a foreign counterpart is involved, the parties often choose an international arbitration body such as the Singapore International Arbitration Centre (“SIAC”) or the International Chamber of Commerce (“ICC”) to settle their dispute.

The rules of the arbitration depend on the parties’ agreement. As an illustration, if the parties choose BANI to resolve their dispute, the process is (i) submission of an application for a notice of arbitration, (ii) response to the notice of arbitration, (iii) appointment of arbitrator(s), (iv) payment of the arbitration fees, (v) examination of the case, (vi) proceedings, and (vii) award. Read more »

SSEK Advises Shinhan Investment Corp. on Acquisition of Indonesian Securities Company

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SSEK Legal Consultants has acted as Indonesian counsel to Shinhan Investment Corporation, one of South Korea’s leading securities brokerage and investment banking houses, in its acquisition of Indonesian securities company PT Makinta Securities. Fahrul S. Yusuf, a partner at SSEK, and Jonathan M. Streifer, a foreign legal advisor at the firm, led the SSEK team advising on the transaction. Kim & Chang was Shinhan Investment Corporation’s counsel in South Korea.

Downsizing in Indonesia

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By Richard D. Emmerson and Indrawan D. Yuriutomo

There has been considerable confusion about whether the law and courts allow employers in Indonesia to downsize a part of their workforce for efficiency reasons. We are writing to clarify the matter.

Termination under Article 164(3) of the Employment Law

Article 164(3) of Law No. 13 of 2003 regarding Employment allows a company to terminate employees when closing the company for efficiency reasons (i.e., without two consecutive years of financial losses or force majeure) with double severance pay. Article 164(3) of the Employment Law provides as follows:

An employer may terminate the employment of an employee if the company is closed not due to losses being suffered for 2 (two) consecutive years and not due to force majeure if the company is implementing efficiency provided that the employee shall be entitled to severance pay equal to 2 (two) times that provided in Article 156 paragraph (2), service pay equal to 1 (one) times that provided in Article 156 paragraph (3) and the compensation entitlement as provided in Article 156 paragraph (4).

The Employment Law is clear that an employer can terminate employees with Labor Court approval upon paying the “double severance” package if the company is closing for efficiency reasons, but there has been uncertainty about whether an employer can downsize a part of its workforce under Article 164(3) and continue operating the business. The law does not expressly mention such downsizing. Read more »

Indonesian Legal Review: Franchise Law

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With approximately 260 million people, Indonesia is the largest consumer market in Southeast Asia and the ASEAN region and is attractive to international and local franchise businesses. When the Government of Indonesia (the “GOI”) introduced a number of economic policy packages in a de-regulation effort to stimulate the economy, none of the policy packages focused on the franchising sector. The fact that no regulatory change occurred is noteworthy.

The following background information is helpful to understand that there may be no de-regulation in this sector.

Current Law

  • Law Number 7 of 2014 on Trade
  • Government Regulation Number 42 of 2007 regarding Franchise (“GR 42/2007″)
  • Minister of Trade (“MOT”) Regulation Number 53/M-DAG/PER/9/2012 regarding Franchise Organization as amended lastly by MOT Regulation No. 57/M-DAG/PER/9/2014 regarding Amendment of MOT Regulation No. 53/M-DAG/PER/8/2012
  • MOT Regulation Number 68/M-DAG/PER/10/2012 regarding Franchise for the Modern Store Business
  • MOT Regulation Number 07/M-DAG/PER/2/2013 regarding Partnership Development in Franchise for the Food and Drinks Service Business as lastly amended by MOT Regulation No. 58/M-DAG/PER/9/2014 regarding Amendment of MOT Regulation No. 07/M-DAG/PER/2/2013

The above regulations are collectively referred to as the “Franchise Regulations”.

Under the Franchise Regulations, the franchisor and franchisee have legal obligations, be they jointly or separately. Among others, these are: Read more »

Update on Indonesian Employment Law

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Richard D. Emmerson, a senior foreign legal advisor at SSEK Legal Consultants, has contributed the Indonesia chapter to the new Asia Employment Law, a quarterly review of employment law developments across 15 jurisdictions in Asia. The review is designed to help legal and human resources advisors stay up to date on employment-related legal developments around Asia.

For the Indonesia chapter of the Employment Law review, click here.

You can see the full report here.

Mr. Emmerson has 30 years of experience as a corporate-commercial lawyer. He has extensive experience advising on all aspects of labor and employment law in Indonesia. Mr. Emmerson has been endorsed by Chambers Asia, Asia Law & Practice and Who’s Who Legal as a leading labor and employment lawyer. He is a member of the Employment Law Alliance, the leading global alliance of labor and employment law firms and lawyers. Read more »

What You Need to Know about the Indonesian Tax Amnesty Law

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By Andini H. Dewi

The Indonesian Government recently issued the long-awaited and anticipated Tax Amnesty Law (Law No. 11 of 2016). Discussion of a possible tax amnesty began in 1998, as part of a larger projected overhaul of the tax system in Indonesia. However, the discussions faltered and the Government, instead of a tax amnesty, implemented a tax “sunset policy” in 2008 through the third amendment of Law No. 6 of 1983 regarding General Taxation Provisions and Procedures (the “General Taxation Provisions Law”).

The effort to stimulate the Indonesian economy by increasing tax revenue did not stop in 2008, with a second sunset policy introduced in 2015 through the issuance of Minister of Finance of Regulation No. 91/PMK.03/2015 regarding Reduction or Elimination of Administrative Sanction for the Late Submission of Tax Return, Revision of Tax Return, and Late Payment or Remittance of Tax.

Neither the 2008 or 2015 sunset policy “forgave” the principal tax debt; they simply provided a reduction and/or elimination of administrative sanctions for the late submission or revision of annual income tax returns. Unlike the sunset policy, the tax amnesty under the Tax Amnesty Law eliminates the principal tax debt and administrative sanctions, as well as providing no-examination of tax crimes.

What the Tax Amnesty Is

Article 1 point 1 of the Tax Amnesty Law defines Tax Amnesty as the elimination of payable taxes, which shall not be subject to any administrative sanction or criminal sanction, by disclosing the Assets and paying Redemption Money as regulated under this Law (emphasis added). Read more »

Legal Alert July 2016

Legal Alert (for blog post)

Please find the SSEK Legal Alert for July 2016. The SSEK Legal Alert is a monthly survey designed to keep you up to date with the latest legal developments in Indonesia. Read more »