Legal Updates for February 2020

Indonesia Ratifies the Beijing Treaty

On 28 January 2020, Indonesia ratified the WIPO (World Intellectual Property Organisation) Beijing Treaty on Audiovisual Performances ("Beijing Treaty"). The Treaty provides the legal basis to implement the protection of audiovisual performance works shown through electronic media.

The Beijing Treaty’s official website states that it is a multilateral treaty that acknowledges the intellectual property rights of performers with regard to their audiovisual performances. It provides the global standards in recognising the right of audiovisual performers to be compensated fairly for the use of their creative contributions. The Beijing Treaty grants economic rights as well as moral rights to the performers, allowing them to capitalise on their performances, improve their livelihoods, and better protect their images.

After Push from the Industry, Government Relaxes Foreign Ownership Restrictions on Insurance Companies

Recognising the role of foreign insurance companies and foreign investors with their capital, experience and technology, the Indonesian government in 2018 issued Government Regulation No. 14 of 2018 ("Regulation 14/2018") to allow up to 80% of foreign ownership in a non-publicly listed insurance company. This allowance has been relaxed even further through Government Regulation No. 3 of 2020 ("Regulation 3/2020"), which allows a foreign investor to hold more than 80% of the shares of a non-publicly listed insurance company in Indonesia.

Pursuant to Regulation 14/2018, foreign citizens and entities were precluded from owning more than 80% ("Foreign Ownership Limit") of the paid-up capital of an insurance company (i.e. non-publicly listed insurance company, Sharia insurance company, reinsurance company, Sharia reinsurance company, insurance brokerage company, reinsurance brokerage company and insurance loss adjuster company). If an insurance company wishes to increase its paid-up capital, at least 20% of the additional paid-up capital must be obtained from an Indonesian entity and/or citizen, or through an initial public offering (IPO) in Indonesia.

Regulation 3/2020 has clarified that a non-publicly listed insurance company whose foreign ownership has exceeded the 80% threshold will be exempted from the Foreign Ownership Limit. This means that foreign investors can increase their shareholding in proportion to their existing ownership percentage.

Shariah Banks Finally Enjoying the Benefits of Synergy

At the end of 2019, Indonesia's financial services authority,Otoritas Jasa Keuangan or “OJK”, issued Regulation No. 28 of 2019 on Synergy of Banks under One Ownership for the Development of Shariah Banking (“Regulation”). The Regulation aims to improve the efficiency of the national banking industry, and encourage cooperation between conventional banks and Shariah banks with an ownership relationship (through common controlling shareholder or where the conventional bank is the controlling shareholder of the Shariah bank).

Under the Regulation, the synergy between conventional and Shariah banks is to be reflected in resources sharing, including with respect to human resources, branch network and IT. While Shariah banking in Indonesia has grown steadily, their resources are still not on par with that of the conventional banking. By allowing Shariah banks to tap into the resources of their conventional counterparts, OJK hopes that Shariah banks would finally be able to compete on a level playing field.

More Clarity Expected as OJK Issues New Rule on Bank's Corporate Actions

The Financial Services Authority (Otoritas Jasa Keuangan or "OJK") issued OJK Regulation No. 41/POJK.03/2019 on Merger, Consolidation, Acquisition, Integration and Conversion of Commercial Banks ("Regulation") at the end of last year. The Regulation revokes Bank Indonesia decrees No. 32/50/KEP/DIR on Requirements and Procedures to Purchase Shares of Banks and No. 32/51/KEP/DIR on Requirements and Procedures of the Merger, Consolidation and Acquisition of Banks.

The Regulation stipulates that OJK will govern the process and procedure of merger, consolidation, acquisition, integration and conversion (collectively, "corporate actions") of commercial banks.