Foreign Investment and Dispute Resolution in the Indonesian Oil and Gas Sector

Oil & Gas Regulation 2017

By Fitriana Mahiddin and Syahdan Z. Aziz

Indonesia’s new Negative Investment List, as recently issued in Presidential Regulation No. 44 of 2016 regarding List of Business Fields that Are Closed and Business Fields that Are Open with Requirements in the Field of Capital Investment, stipulates the foreign shareholding limitations for various business fields. Among others, onshore drilling is closed to foreign investment while offshore drilling is restricted to a maximum of 75% foreign shareholding. The distribution and trading of natural gas, if not affiliated to production, are limited to 67% foreign shareholding.

International Treaties

As a matter of international law, international treaties and other multinational agreements are binding upon the state upon ratification. Ratification of such international instruments is normally done by way of a presidential regulation, which will be further implemented by a ministerial regulation. All regulations and decrees issued afterward must not deviate from the provisions of the international treaty or the national regulation enacted in light thereof. Therefore, once an international treaty is binding upon the Government, regulatory policy or activity shall develop in accordance with the international treaty. Among others, Indonesia is a party to the United Nations Convention on the Law of the Sea (“UNCLOS”), the 1987 Montreal Protocol and the International Convention on Civil Liability for Oil Pollution Damage and the protocols and amendments thereof.

Additionally, tax treaties and bilateral investment treaties may be relevant, although the Government recently announced that Indonesia will be withdrawing from all bilateral investment treaties to which it is a party.

Dispute Resolution Read more »

The Development of Personal Data Protection in Indonesia


By Fahrul S. Yusuf and Winnie Y. Rolindrawan

After months of drafting and deliberation, Indonesia’s Ministry of Communication and Informatics (“MOCI”) in late 2016 issued a long-awaited regulation on the protection of personal data. MOCI Regulation No. 20 of 2016 regarding the Protection of Personal Data in Electronic Systems (“MOCI Reg”) was issued on December 1, 2016. As the title suggests, it regulates the protection of personal data by electronic system providers in Indonesia, a long-standing grey area in the country.

History of Personal Data Protection in Indonesia

The protection of personal data in electronic systems was first regulated under Law No. 11 of 2008 regarding Electronic Information and Transactions, as amended (“ITE Law”), which provides general overarching guidelines for the handling of personal data. The ITE Law stipulates that, unless otherwise regulated, the use of any information pertaining to a person’s personal data through an electronic media requires the consent of such person (Article 26 paragraph (1) of the ITE Law). The elucidation of this article provides that the protection of personal data is a part of privacy rights, and defines privacy rights to encompass the following: Read more »

SSEK Lawyers Recognized in 2017 Asialaw Leading Lawyers

Asialaw 2017

Nine partners and foreign legal advisors at SSEK Legal Consultants were recognized in the 2017 edition of Asialaw Leading Lawyers, the guide to the leading lawyers in Asia-Pacific. The nine were recognized as leading lawyers in Indonesia across a total of six practice areas.

SSEK is a full-service corporate and commercial law firm based in Jakarta. The depth of the firm’s experience and expertise was underlined by its showing in the latest edition of Asialaw Leading Lawyers.

Its partners and advisors were recognized as leaders in the following practice areas: Banking & Finance; Capital Markets; Construction & Real Estate; Corporate/M&A; Energy & Natural Resources; and Projects & Infrastructure.

They were named 2017 Asialaw Leading Lawyers as follows: Read more »

SSEK Partner Ira Eddymurthy Named a Leading M&A Lawyer for Indonesia

Ira Eddymurthy

Ira A. Eddymurthy, a founding partner of SSEK Indonesian Legal Consultants, has been recognized as a leading lawyer for mergers and acquisitions in the 2017 edition of Who’s Who Legal: M&A and Governance.

Ira leads SSEK’s M&A practice and has extensive experience working with the largest companies doing business in Indonesia. Who’s Who Legal notes that Ira offers clients comprehensive expertise in the gamut of corporate and M&A matters.

Clients praise her 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 M&A, Ira is recognized by Who’s Who Legal as one of Indonesia’s leading lawyers for banking, energy and project finance. She is recognized by Chambers & Partners as a leading lawyer for corporate/M&A, Legal 500 for banking and finance, capital markets and corporate/M&A, and by Asialaw for capital markets and corporate/M&A. Read more »

Oil and Gas Transportation and Infrastructure in Indonesia

Oil & Gas Regulation 2017

By Fitriana Mahiddin and Syahdan Z. Aziz

Gas transportation by pipeline in Indonesia is regulated under Government Regulation No. 36 of 2004 regarding Upstream Oil and Natural Gas Business Activities as has been amended by Government Regulation No. 30 of 2009 (“GR 36″) and Ministry of Energy and Mineral Resources (“MEMR”) Regulation No. 19 of 2009 regarding Natural Gas Business through Pipelines, and is controlled by the Downstream Oil and Gas Regulatory Agency (“BPH Migas”). It can only be carried out by a business entity established in Indonesia that has obtained a transportation license from the MEMR, unless such transportation is a continuation of the upstream activities of a Production Sharing Contract (“PSC”) Contractor.

The MEMR, as mandated by the Oil and Gas Law (Law No. 22 of 2001 regarding Oil and Gas), has established a transportation master plan. This master plan is relied upon by BPH Migas to, inter alia, determine transmission routes and distribution networks, tender Special Rights, and to determine tariffs in accordance with techno-economic principles.

Governmental Authorizations

In addition to a gas transportation license from the MEMR, a business entity must also obtain Special Rights from the MEMR to transport gas by pipeline within the stipulated transmission and distribution routes by way of tender. An environmental license must also be obtained by preparing the relevant environmental document, which can be an Environmental Impact Analysis (“AMDAL”) or Environmental Management and Monitoring Efforts (“UKL/UPL”), depending on the length and pressure of the pipelines. Read more »

Legal Alert May 2017

Legal Alert

Please find the SSEK Legal Alert for May 2017. The SSEK Legal Alert is a monthly survey designed to keep you up to date with the latest legal developments in Indonesia.

Click here: Legal Alert May 2017

Bauxite Mining and Alumina Refinery Investment Environment in Indonesia

Michael Carl

Michael S. Carl, an international legal adviser at SSEK Indonesian Legal Consultants, was invited to give a presentation at the 3rd Global Bauxite Conference 2017 on the Bauxite Mining and Alumina Refinery Investment Environment in Indonesia. The conference was held June 14-15 in Jakarta.

You can find his presentation materials here.

Michael Carl is the supervising adviser for SSEK’s mining practice. He works with multinationals and large domestic companies on all aspects of their operations in Indonesia’s mining sector, including advising on smelting and other possible investments in mining assets in Indonesia. Michael is recognized for his broad knowledge and experience with Indonesian law and his ability to help companies navigate the country’s regulatory environment. Read more »

Insurance Companies in Indonesia Must Appoint Controller


By Ira A. Eddymurthy and Maria Yudhitama

Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) has issued a regulation that requires insurance companies in Indonesia to appoint a controller by June 2017 at the latest.

OJK Regulation No. 67/POJK.05/2016 regarding Business Licensing and the Organization of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies and Sharia Reinsurance Companies, dated December 23, 2016 (“POJK 67″), requires insurance companies to report the appointment of a controller to the OJK, as required by the Insurance Law (Law No. 40 of 2014 regarding Insurance).

POJK 67 defines a controller as a party who has the ability, either directly or indirectly, to appoint the directors and commissioners of an insurance company, and can control the decisions or actions taken by directors or commissioners. The controller can be a shareholder, most likely the majority shareholder, or another party who fulfills the above criteria, and will be held responsible for the business continuity of the insurance company under its control. This means the controller must support the insurance company’s business development and fulfillment of financial soundness criteria, and fulfillment of the insurance company’s obligations to its insured or policyholders. Read more »

Insurance Companies in Indonesia Must Follow Requirement on Ultimate Shareholders


By Ira A. Eddymurthy and Maria Yudhitama

The Indonesian Insurance Law (Law No. 40 of 2014 regarding Insurance) introduced a significant change regarding the shareholding composition of insurance companies. Breaking from previous policy, the Insurance Law specifically mandates that the local shareholders in an insurance company must be ultimately owned by Indonesian individuals.

After the enactment of the Insurance Law, the dual-layer PMA structure that foreign entities had utilized to ultimately own 100% of an Indonesian insurance company is no longer allowed.

Existing insurance companies whose local shareholders are not ultimately owned by Indonesians are not grandfathered; they must comply with this requirement under the Insurance Law by either (i) transferring the foreign-owned shares to Indonesian(s), or (ii) going public (if the first option is unsuccessful).

Insurance companies that find themselves in the position of having to make changes in order to comply with this local shareholders requirement must prepare an action plan containing planned steps to achieve compliance and the schedule for such steps. This action plan must be approved by a general meeting of shareholders and then submitted to the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) at the latest by June this year. The OJK will approve the action plan or ask that is be revised and re-submitted. Read more »

Recent Developments in Bankruptcy Law and Suspension of Debt Payments in Indonesia


By Dewi Savitri Reni and Dimas Indartono

Indonesia has had a bankruptcy law since 1905, when Staatsblad 1905 No. 217 juncto Staatsblad 1906 No. 348 Concerning Bankruptcy was enacted. In response to the 1997-98 Asian financial crisis, and the view that the 1905 bankruptcy law was out of date and irrelevant to modern commercial needs, the Government on April 22, 1998, issued Government Regulation in Lieu of Law No. 1 of 1998 regarding Amendments to the Bankruptcy Law. GR 1/1998 was adopted as Law No. 4 of 1998 on September 9, 1998. Law No. 4 of 1998 was eventually revoked by Law No. 37 of 2004 regarding Bankruptcy and Suspension of Debt Payment Obligations dated October 18, 2004 (the “Bankruptcy Law”).

Bankruptcy is a situation where, among other things, (i) a court declares a person or entity unable to pay its creditors, and (ii) the court appoints a receiver. The job of a court-appointed receiver, supervised by a supervisory judge, is to sell or manage a debtor’s assets to satisfy the debtor’s obligations to its creditors.

The Bankruptcy Law also introduces the concept of a court-supervised debt restructuring process, known as Suspension of Debt Payment Obligations (Penundaan Kewajiban Pembayaran Utang or “PKPU”). PKPU proceedings give a debtor the chance to avoid bankruptcy proceedings by preparing, negotiating and submitting a composition plan to its creditors for their approval. The composition plan details how outstanding debts are to be restructured and typically provides, among other things, for rescheduled and extended payment terms, perhaps with a grace period, reduced interest rates and a waiver of penalties and overdue interest.

Notable Recent Developments in Bankruptcy Law Read more »