Articles of Association of an Indonesian Company: The More Comprehensive, The Better

Written by Lasmaroha Simbolon Foreign companies continue to mull investment in Indonesia by the establishment of joint venture companies with local Indonesian entrepreneurs. However, foreign and Indonesian parties tend to focus all their time and attention on the creation of hefty joint venture agreements, making sure that nothing is left behind in terms of provisions, [...]

Investment Investment

New Indonesian Mining Divestment Requirements

Written by Darrell R. Johnson and Kharisma Perwiro On February 21, 2012, the Indonesian Government issued Government Regulation No. 24 of 2012 (“GR 24”) which amended Government Regulation No. 23 of 2012 on the Implementation of Coal and Mining Activities. (For a full English Translation of GR 24, click here). GR 24 is the implementing [...]

Mining 3 Mining 3

A Legal Guide to Land & Real Estate in Indonesia: Recent Trends

This is the third post in our Legal Guide to Land & Real Estate issues in Indonesia. Dyah Soewito and Denny Rahmansyah will address a new topic each week. While we’ve looked at different types of land titles and registration of such titles, this post will focus on recent industry trends. Recent trends in the [...]

RealEstate&Property RealEstate&Property

2011 Indonesian Law Review: Wiretapping & Telecommunications

Written by Dicky Tanjung & Richard D. Emmerson A hot topic in recent years in Indonesia, the act of wiretapping or interception, is most commonly defined as activities of listening and/or recording transmission of electronic information or documents using various methods through telephone lines, electronic systems and radio frequencies. With the proliferation of digital devices [...]

KONICA MINOLTA DIGITAL CAMERA KONICA MINOLTA DIGITAL CAMERA

2011 Indonesian Law Review: Oil & Gas

Written by Syahdan Z. Aziz In 2011, the two major legal developments affecting the oil and gas industry included ongoing discussions of Government Regulation No. 79 as well as steps toward drafting a new Oil & Gas Law in Parliament. Government Regulation No. 79 In late 2010, the Government of Indonesia issued Government Regulation No. [...]

Oil & Gas Oil & Gas

New Indonesian Mining Divestment Requirements

April 11th, 2012 david
Mining 3

Written by Darrell R. Johnson and Kharisma Perwiro

On February 21, 2012, the Indonesian Government issued Government Regulation No. 24 of 2012 (“GR 24”) which amended Government Regulation No. 23 of 2012 on the Implementation of Coal and Mining Activities. (For a full English Translation of GR 24, click here).

GR 24 is the implementing regulation of Law No. 4 of 2009 Regarding Mineral and Coal Mining (the “Mining Law”).  GR 24 now requires foreign shareholders of Indonesian mining companies that hold a mining license (called an “IUP”) or a special mining license (called an “IUPK”) to divest 51 percent of their shares starting five years after commencement of commercial production and ending ten year thereafter.

This is a significant departure from the previous divestment rule that required foreign shareholders to divest only 20 percent of their shares after the fifth year of commercial production.

New Divestment Requirements

While GR 24 has made other changes to the regulatory regime, the new divestment requirement is its most significant provision.

GR 24 amends the previous 20 percent divestment rule by requiring a share disposition by the following stages:

  • at least 20 percent by the sixth year after the commencement of commercial production;
  • at least 30 percent by the seventh year after the commencement of commercial production;
  • at least 37 percent by the eighth year after the commencement of commercial production;
  • at least 44 percent by the ninth year after the commencement of commercial production; and
  • at least 51 percent by the tenth year after the commencement of commercial production.

A foreign-owned mining company is therefore required to surrender majority control of the company, and hence the mining asset, not later than ten years after commercial production.

Possible Divestment Options

The foreign shareholder cannot simply select the buyer to which it would like to divest.  The buyer must be Indonesian and GR 24 sets forth a priority of Indonesian parties to whom the shares must be offered.

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A Guide to Land & Real Estate in Indonesia: Foreign Investment

April 10th, 2012 david

This is the fourth post in our Legal Guide to Land & Real Estate issues in Indonesia. Dyah Soewito and Denny Rahmansyah will address a new topic each week.

Foreign Investment

The Agrarian Law provides that a foreigner can only acquire the Hak Pakai title for land if they reside in Indonesia.  If foreign investors wish to engage in business in Indonesia, they must establish a PMA Company.  As stated at the outset, the PMA Company is able to acquire a HGB or a Hak Pakai title, while foreign individuals can only possess the Hak Pakai title.

As mentioned in our previous post, the HGB or Hak Pakai title may also be placed “over” the seller’s pre-existing Hak Milik or Hak Pengelolaan title.  Under the applicable regulation, individual foreigners are allowed to own residential property under the Hak Pakai title.  Specifically, foreigners who provide benefits to national development, reside permanently or temporarily in Indonesia and have proper immigration documents can purchase the following:

  • vacant land with a Hak Pakai title;
  • apartments on Hak Pakai title as its underlying title;
  • non-subsidized houses on Hak Pakai title; and
  • any of the above with the lease right as evidenced by the lease documents entered into with the landowner.

Adat Land

Issue arises if a foreign investor acquires traditional or customary land (known as Adat land).  In Indonesia (particularly in rural areas)  large areas of land exist which usually are held through a traditional joint community ownership structure and which have not been registered and certificated with the relevant land office under the Agrarian Law.  The rights to these areas are still governed by Adat or customary law.  Adat rules vary significantly from one area to another within Indonesia.

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Property Seminar: Property Purchases by Foreigners and PMA Companies in Indonesia

April 9th, 2012 david

The European Chamber of Commerce and the British Chamber of Commerce are hosting a property seminar regarding the issue of foreigners owning property in Indonesia. With Indonesia now being a prominent member of G20 and a prime investment target for foreigners, the issue of private property ownership has been revived.

To clarify some of the key issues regarding property ownership, what rights a foreign property owner has, and what possibilities there are to get financing for property purchases, Eurocham and Britcham have invited a number of prominent panelists from a range of relevant fields.

Richard Emmerson of SSEK is participating as a panelist speaker, while other speakers include representatives from Jones Lang LaSalle – Procon, Bank Mandiri, PT Bank Commonwealth, and Ciputra.

When: April 17, 2012

Time: 7:30 – 9:00am

Where: Intercontinental Hotel Midplaza

Registration: Please contact registration@eurcham.or.id for more information and to register. IDR 300,000 for non-members.

A Legal Guide to Gas Regulation in Indonesia: Transportation

April 4th, 2012 david

This is the third post in our Legal Guide to Gas Regulation in Indonesia. Fitriana Mahiddin and Syahdan Z. Aziz will address a new topic each week.

Transportation

While private companies may own and operate pipelines and storage facilities, the Minister and BPH Migas will determine how those downstream activities are organised and conducted.

The Minister is charged with developing a national gas transmission and distribution network master plan.  BPH Migas may conduct auctions of special rights to transport natural gas by pipeline in certain regions based on the master plan and to stipulate what should be paid for the rights granted.  These rights are limited to a certain pipeline network.

BPH Migas may also: regulate the transportation through pipelines and distribution of natural gas; stipulate the joint use of transportation, distribution and storage facilities; determine the obligations of private entities engaging in downstream activities where market mechanisms are not functioning; in remote areas, set tariffs for pipeline use; and set the price of natural gas for households and small-scale consumers.

Companies engaging in the transportation of natural gas through pipelines or by trading natural gas must pay a defined contribution or toll to BPH Migas, based on volumes transported or sold.  The contribution is for BPH Migas’s working plan and budgetary purposes.

Land Rights & Acquisition

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Legal Alert February 2012

April 2nd, 2012 david

Please find attached the latest Legal Alert for February 2012.

SSEK’s Legal Alert is a monthly survey designed to keep you up to date with the latest legal developments in Indonesia.

Click here: Legal Alert_February_2012

A Legal Guide to Land & Real Estate in Indonesia: Recent Trends

March 29th, 2012 david
RealEstate&Property

This is the third post in our Legal Guide to Land & Real Estate issues in Indonesia. Dyah Soewito and Denny Rahmansyah will address a new topic each week.

While we’ve looked at different types of land titles and registration of such titles, this post will focus on recent industry trends. Recent trends in the real estate sector include a new Condominium Law, the emergence of townhouse developments, the land acquisition law and hotel development in Bali.

New Condominium Law

While the Agrarian law regulated land, the increased demand for housing, particularly in cities, has provided way to new housing laws and regulations. Multi-story structures, including condominiums (Rumah Susun) are governed by a new, additional regulatory regime.

Indonesia has recently enacted a new Condominium Law, Law No. 20 of 2011.  Under this Law, a condominium is defined as a building(s)divided into parts functionally structured in horizontal and vertical directions and constituting units, each of which can be possessed and used separately, including as residences, complete with common parts, common items and common land. A current trend in Indonesia is for people, including foreigners, to purchase condominiums/apartments.

As mentioned earlier, the Agrarian Law governs the rights over ownership of land in Indonesia, and this Law covers land rights which apply to Indonesian citizens and foreigners.  The specific land title for foreigners is the Hak Pakai title.

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A Legal Guide to Gas Regulation in Indonesia: Development & PSCs

March 27th, 2012 david

This is the second post in our Legal Guide to Gas Regulation in Indonesia. Fitriana Mahiddin and Syahdan Z. Aziz will address a new topic each week.

Development: Law No. 22 of 2001

Development of natural gas is governed by Law No. 22 of 2001 regarding Oil and Natural Gas (Law 22) and its implementing regulations: Government Regulation No. 35 of 2004, lastly amended by Government Regulation No. 55 of 2009 regarding Upstream Oil and Gas Business Activities (GR 35), and Government Regulation No. 36 of 2004 regarding Downstream Oil and Gas Business Activities, as amended (GR 36).

Law 22 and these government regulations substantially changed the existing business structure for both oil and gas activities, especially for downstream gas activities.

While Law 22 changed the regulatory framework of the oil and gas sector in a number of significant respects, two changes need to be highlighted: Law 22 dramatically changed the role of the state-owned oil and gas enterprise, Pertamina; and it liberalised the downstream natural gas business.

Law 22 grants the government the exclusive rights for oil and gas exploitation and requires all private companies wishing to explore for and exploit oil and gas resources to enter into cooperation contracts, based upon a production sharing scheme, with BP Migas.  BP Migas has promulgated a form of cooperation contract that is substantially similar to the PSC previously used by Pertamina, with the one significant exception for the natural gas sector being the imposition of a domestic market obligation on natural gas.

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A Legal Guide to Land & Real Estate in Indonesia: Registration

March 22nd, 2012 david

This is the second post in our Legal Guide to Land & Real Estate issues in Indonesia. Dyah Soewito and Denny Rahmansyah will address a new topic each week.

Registration

The system of land registration in Indonesia includes measuring, mapping and recording the land dimensions, registering the land title (which includes a public announcement) and, finally, the issuance of the land certificate under the applicant’s name.

The advantages of registration include that the applicant is entitled to the title he or she acquires without any interference from other parties.  The legal effect of recordation in a land registration book and land certificate varies depending on when the certificate was issued.

1997 Government Regulation on Land Registration

Prior to the 1997 Government Regulation on Land Registration, any land certificate issued constituted presumptive evidence that the registered holder of the certificate is the owner of the land covered thereby.  This means that it was possible to set aside the certificate and title if another person claimed rights to the land and could successfully challenge the rights of the certificate holder.

This may have occurred if, for example, in the course of the land relinquishment process, the notary/land deed official failed to adequately ensure that all persons with customary law rights were included in the relinquishment.

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A Legal Guide to Gas Regulation in Indonesia: Overview

March 20th, 2012 david

This is the first post in our Legal Guide to Gas Regulation in Indonesia. Fitriana Mahiddin and Syahdan Z. Aziz will address a new topic each week.

Gas Regulation: Overview

Indonesia has the fourteenth largest natural gas reserves in the world and the second largest in the Asia-Pacific region in 2010, reaching 157.14 TcF (108.4 TcF proven and 48.75 TcF probable).  The natural gas reserves are mainly located offshore, including the Natuna Islands, East Kalimantan, South Sumatra and West Papua.

In 2010, natural gas production reached 9,336 MMSCFD: 51.7% of the natural gas produced in Indonesia is exported, while the remaining 48.3% of the produced natural gas is used domestically.  333,993 MMSCF of Indonesia’s natural gas is exported via pipeline, amounting to 19% of the total export.  The remaining 81% of 1,761,910 MMSCF of the total export is exported in the form of LNG.

Currently, Indonesia has three main LNG export facilities: the Arun; Bontang; and Tangguh facilities, which produce 123,412,510 MMBTU, 986,140,096 MMBTU and 35,624,640 MMBTU respectively.  The total production, approximately 1,134,913 MMBTU, is exported mainly to Japan, Korea and Taiwan.  Indonesia also exports natural gas via pipelines from the West Natuna fields to Singapore and Malaysia and from south Sumatra to Singapore.

In 2010, 1,429.198 BcF, or 42.271 BcM natural gas, was consumed domestically.  The fertiliser, petrochemical and power generation industries are the principal domestic consumers of natural gas in Indonesia.

Coal Bed Methane (CBM)

In 2008, Indonesia enacted the Regulation of the Minister of Energy and Mineral Resources (Minister) No. 36 of 2008, to facilitate the development of the coalbed methane (CBM) business.

The CBM market is promising as demand for gas in the domestic market is growing.  Indonesia holds an estimated 435 TcF of CBM reserves.  Production Sharing Contracts (PSCs) have been awarded since 2008 but currently all are still in the exploration phase. Currently, 32 (thirty two) cooperation contracts for CBM have been executed.

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Outsourcing Arrangements for Employees in Indonesia

March 19th, 2012 david

Written by Dewi Savitri Reni

On January 17, 2012, the Constitutional Court (the “Court”) decided Case No. 27/PUU-IX/2011 relating to outsourcing.

The Petitioner in the case is Mr. Didik Suprijadi, the Head of the General Chairman of the Central Board of an Indonesian NGO named the Electricity Meters Readers Alliance (Lembaga Swadaya Masyarakat Aliansi Petugas Pembaca Meter Listrik Indonesia or “AP2ML”).

Background: the 2003 Manpower Law

According to his elaboration, he believed that after the enactment of Law No. 13 of 2003 Regarding Manpower (March 25, 2033) (the “Manpower Law”), many companies in Indonesia have outsourced part of their work, such as security and cleaning services.  Many companies have also employed workers using a fixed term employment agreement arrangement.

This is viewed by the Petitioner as a way to reduce labour costs because by employing workers by using outsourcing arrangements or fixed term employment agreement arrangements, the companies are not obligated to provide those employed workers with benefits as per the Manpower Law.

Supreme Court Review

As a reaction to such practices, the Petitioner requested that the Court review Articles 59, 64, 65, 66 of the Manpower Law.  He argued that the foregoing Articles in the Manpower Law have violated Articles 27 paragraph 2, Article 28D paragraph 2 and Article 33 paragraph 1 of the 1945 Indonesian Constitution (the “Constitution”).

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