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Banking
Regulation issued on bank ownership
After heated debate among regulators and politicians on what was seen as unhealthy concentrated ownership of banks by groups of companies – particularly foreign groups of companies – Bank Indonesia, the country's central bank and industry regulator, has issued the Regulation on Ownership of Shares in Commercial Banks, which restricts ownership of banks by individual shareholders.
Parliament's long-awaited approval of the Bill on the Financial Services Authority is one of the most significant developments in the history of Indonesian law and will change the landscape of the country's financial industry. It not only establishes a new financial services authority, but also positions this new body as the main regulator and supervisor of Indonesia's financial sector.
In light of the current financial instability, Bank Indonesia has recently issued three regulations in an effort to make Indonesian exporters deposit their export revenues into banks in Indonesia. They include the requirement that stipulates that all foreign exchange export proceeds be received and deposited by the exporter in a foreign exchange bank.
The new Currency Law is likely to have a major impact on Indonesia's payment systems and in the fields of trade and finance due to its requirements regarding the use of rupiah for payments. Its controversial prohibition of foreign currency for domestic payments appears to catch Indonesian subsidiaries and branches of foreign companies, including foreign-owned companies and bank branches.
Asset quality assessment of Sharia banks
Bank Indonesia has issued the Regulation on Asset Quality Assessment for Commercial Sharia Banks and Sharia Business Units. It requires Sharia-compliant banks and Sharia business units to assess and supervise their own asset activities and to be proactive in ensuring the liquidity of their productive and non-productive assets.
The head of the Indonesian Financial Transactions Report and Analysis Centre has issued a new regulation on the procedure for the submission of reports on suspicious financial transactions. Among other things, the regulation is intended to prevent and eventually abolish money laundering, and to improve the reporting system used by financial providers.
Capital Markets
New regulation on material transactions
The chairman of the Indonesian securities regulator, Bapepam-LK, has issued a new regulation on material transactions. The regulation seeks not only to perfect the regulation of material transactions, but also to simplify the procedure for a public company to obtain funding through private offerings of debt securities.
Parliament's long-awaited approval of the Bill on the Financial Services Authority is one of the most significant developments in the history of Indonesian law and will change the landscape of the country's financial industry. It not only establishes a new financial services authority, but also positions this new body as the main regulator and supervisor of Indonesia's financial sector.
The head of the Indonesian Financial Transactions Report and Analysis Centre has issued a new regulation on the procedure for the submission of reports on suspicious financial transactions. Among other things, the regulation is intended to prevent and eventually abolish money laundering, and to improve the reporting system used by financial providers.
After allowing issuers and public companies to issue shares with nominal value during the last financial crisis in the late 1990s, Bapepam – the Capital Market and Financial Institutions Supervisory Agency – finally issued Regulation IX.D.6 on the issuance of shares with different nominal value, which provides formal regulatory framework for this type of share issuance.
The Capital Markets and Financial Markets Supervisory Agency has issued a regulation that contains extensive provisions on trustee-related matters, enumerating trustees' tasks, obligations and prohibited actions. However, most of the regulation deals with trusteeship contracts, including the identity of the parties in a debt issuance agreement, buy-back mechanisms and the tasks and obligations of a paying agent.
The Capital Market and Financial Institutions Supervisory Board has issued guidelines on the management of individual customers' securities portfolios. The guidelines were issued as Regulation VG6, which aims to regulate discretionary fund management for the funds of a securities company's individual customers, and requires fund managers to enter into a discretionary fund agreement with the investor concerned.
Competition
The Business Competition Supervisory Commission has been increasingly active in rendering decisions in response to complaints under the Anti-monopoly Law. However, the enforcement of rulings against companies remains problematic, as demonstrated by the unsuccessful attempts to enforce convictions against retailer PT Carrefour Indonesia and state telecommunications firm PT Telekomunikasi Indonesia.
The Business Competition Supervisory Commission has found PT Suracojaya Abadi Motor, the main dealer in Yamaha motorcycles in South Sulawesi, to have conducted discriminatory practices which breached the Anti-monopoly and Unfair Business Competition Law.
Commission Split on Direct Appointment Case
The Business Competition Supervisory Commission recently found against both the distribution unit of the state electricity company and the company which it directly appointed to a project without following a tender process. However, the commission's majority and dissenting opinions are both open to criticism.
The Business Competition Supervisory Commission recently found that PT Perusahaan Gas Negara, the state-owned gas company, had discriminated against applicants in the tender process for the construction of a gas pipeline. The commission has been commended for looking beyond the formalities of the tender and observing the actual processes involved in it.
The Business Competition Supervisory Commission recently cleared Berlian Jasa Terminal Indonesia of allegations of tender rigging in the procurement of services for operating harbour cranes and gantries in the port of Surabaya. The commission made clear the grounds for its findings, but certain aspects of its conclusions are surprising.
The Business Competition Supervisory Commission has found Indonesia's leading cement producer guilty of price fixing and distributor restriction practices which breach the Anti-monopoly and Unfair Business Competition Law. The case differed from most such investigations in that no complaint was filed by the company's business rivals; the commission conducted the investigation on its own initiative.
Corporate Finance/M&A
The government has finally published the long-awaited new Investment Negative List. The new list sets out the lines of business that are closed to investment, as well as those that are open to investment on certain conditions. The new list replaces the previous list, which was issued in 2007.
New regulation on share buybacks unveiled
The Capital Market and Financial Institutions Supervisory Board has issued a regulation regarding the buyback of shares issued by issuers or public companies. This regulation repealed and replaced previous decisions on the same subject matter. Among the board's considerations for issuing the regulation was the need to implement policies that are in line with provisions on share buybacks of the new Company Law.
Corporate Tax
New rules combat double tax treaty abuse
The issue of double tax treaties continues to keep Indonesia in the international spotlight. Two recent circular letters from the Directorate General of Taxation amend the rules on the implementation of double tax treaty agreements and introduce provisions on anti-avoidance in order to combat treaty shopping.
Energy & Natural Resources
The minister of energy and mineral resources has issued Regulation 11/2012, which amends the obligation to refine minerals imposed under Regulation 7/2012 on Increasing Minerals' Added Value Through Mineral Processing and Refining Activities. This new regulation relaxes the previous ban on miners exporting raw materials, ore and rocks.
In an effort to curb raw mineral exports, the minister of trade has issued the Regulation on Provisions of Mining Products Export. The mining products subject to the regulation comprise 65 metal minerals, non-metal minerals and rocks. Under the regulation, these regulated products may be sourced only from parties that hold a mining permit and their export may be conducted only by exporters that are licensed as a registered exporter.
The president has finally signed the long-awaited implementing regulation for Article 74(4) of Law on Limited Liability Companies. The regulation answers the controversial question of whether corporate social responsibility is voluntary or obligatory for companies, and has particular relevance for natural resources companies and those in related industries.
Government Regulation 42/2012 on Cross-Border Power Sale and Purchase was recently signed by the president. The regulation stipulates that cross-border electricity sale and purchase are subject to the prevailing customs laws and regulations, and must adhere to certain requirements.
The government has issued a new regulation to implement certain provisions of the Electricity Law. It covers a range of issues, including licensing and certification, land use for electrical power supply activities and the determination of sales prices, network leases and tariffs.
The Regulation on Mining Business Activities created divestment obligations for foreign shareholders of a company with a mining licence or a special mining licence. A new amendment requires a further divestment of up to 51% to an Indonesian party no later than 10 years after the start of commercial production. A number of other changes may also affect investors in the extractive industries.
Insolvency & Restructuring
Indonesia is home to a significant number of local subsidiaries of foreign conglomerates. As the financial crisis has hit these conglomerates in their jurisdictions of establishment, companies should be aware of how a foreign insolvency could affect Indonesian companies and how Indonesian assets of the corporate group could be included in a global restructuring.
New Bankruptcy Law Comes into Force
Indonesia's new bankruptcy legislation came into force in October 2004. The previous bankruptcy regime was based in part on the Bankruptcy Ordinance 1906, which was drafted in Dutch and had no official Indonesian translation. The latest law is a new piece of legislation, written in Indonesian, that replaces the previous laws in their entirety.
Litigation
Overview
Including: Sources of Regulation; Court Procedure; Court Costs and Legal Fees; Burden of Proof; Court Delay
During the Indonesian Antitrust Commission's investigation into the sale of Indonesia’s second largest car manufacturer, the buyer lodged a complaint accusing the commission of conducting illegal actions. It has also commenced proceedings to appeal the commission's eventual decision that the sale was unlawful.
The Indonesian Bank Restructuring Agency has been granted judicial authority to deal with all cases involving bank insolvencies. Its new powers include the rights to freeze and confiscate assets. However, it is arguable that extending the authority of the courts to a government agency is a breach of national law.
Imprisonment for Debt
Old Dutch laws that allow for the imprisonment of debtors with large outstanding debts were recently re-enacted. It is hoped that this will contribute considerably to the recovery and growth of the Indonesian economy, as existing collection processes have struggled to realize the settlement of debts owed to financial institutions.
Media & Entertainment
A regulation from the Ministry of Communications and Information has established a framework for the provision of Internet Protocol television services in response to greater media and communications convergence and the readiness of Indonesian technology providers to enter the sector. The regulation provides eligibility criteria for providers and sets out the licence application process.
Securitisation & Structured Finance
As part of its efforts to maintain the stability of the rupiah and to ensure an adequate US dollar supply in the domestic market, Bank Indonesia has issued a regulation regarding commercial banks' dollar repo transactions. The regulation opens a window for commercial banks in Indonesia to perform such transactions with Bank Indonesia.
Trade & Customs
The Indonesian House of Representatives has ratified the Association of Southeast Asian Nations (ASEAN) Charter. Indonesia, the largest member and one of ASEAN's founders, is the final member to ratify the charter. The grouping has now met the political deadline for ratification by the ASEAN Summit.
