Legal Updates for June 2020

Amendment to Mining Law: Resolution at Last?

The official text of the amendment to Indonesia's Mining Law (Law No. 4 of 2009) was made available to the public last week as Law No. 3 of 2020. This amendment, consisting of 93 pages, covers a host of flashpoints in Indonesia's mining sectors such as centralisation of authorities, conversion of COW (kontrak karya or contract of work) and CCOW (perjanjian karya pengusahaan pertambangan batu bara or coal contract of work) and IUP (Mining Business Permit) transfer.

OJK Tightens its Grip on the Capital Markets Sector by Issuing Regulation on Private Placement

Back in November 2019, Indonesia's financial services authority, the OJK, issued a regulation on debt securities and sukuk. This regulation, OJK Regulation No. 30/POJK.04/2019 ("POJK 30"), deals specifically with private placement of debt securities and sukuk, and has come into effect on 1 June 2020. POJK 30 is the first private placement regulation in Indonesia. Before this, private placement was only loosely regulated by regulatory supervision. Under POJK 30, the OJK has introduced, among others, criteria for private placement, the concept of eligible issuers and purchasers, and procedures for private placement. This tightening of the private placement market could significantly deter companies from instituting a private placement not only to raise capital but also to restructure their debt and conduct acquisition.

On 12 June 2020, OJK issued a letter on the implementation of POJK 30 ("OJK Letter"). OJK Letter exempts any offshore issuance of debt securities and/or sukuk issued through a private placement that are offered to non-Indonesian investors (either individuals, institutions or any other forms of legal entity). It further explains that an issuer can either decide to voluntarily comply with POJK 30 or mandatorily comply as ordered by the regulator.

Is there Room for Cartel and Collaboration in the New Normal?

Among the many devastating impacts, the COVID-19 outbreak has demonstrated how a pandemic can have a significant and adverse effect on economic activities, both from supply and demand perspectives. Market distortion, disruption of supply-chain and increasing demand for various healthcare products and services are among the main issues sparked by the pandemic.

In responding to these issues, businesses might have contemplated certain collaborative measures to aid in alleviating shortage, ensuring that the public receives reliable supply, helping themselves survive, and even achieve efficiency. However, businesses must be aware that the implementation of those joint measures are not without potential legal implications as they may be recognised as anti-competitive conduct under Indonesian Competition Law.

AHP recently held a webinar on this topic, with Mr. Kurnia Toha, the Chairman of the Indonesia Competition Commission (KPPU), as one of the panellists.  This Update sets out the key takeaways from the webinar on any collaborative business measures, particularly those taken during the pandemic.

BANI Moves to Arbitration Online

At the height of the Coronavirus crisis in March 2020, the Indonesian National Arbitration Board orBANI issued Decree No. 20.007/III/SK-BANI/HU, temporarily suspending all arbitration proceedings in BANI in an effort to contain the outbreak. As the government and businesses are starting to assess the 'new normal,' BANI has revoked the March decree and issued Decree Number 20.015/V/SK-BANI/HU on the Rules and Procedures for Electronic Arbitration (“Decree”). Under the Decree, arbitrations can now be held or continued online by using an electronic telecommunication platform, provided the parties observe the arbitration principles applicable in BANI.

What is worth noting in the Decree is that it is applicable beyond the current health crisis, thus allowing an arbitration proceeding to proceed virtually in the event of a disaster, emergency, or any other exceptional circumstances.

The ability to move an arbitration online applies not only to new and ongoing arbitrations, but to situations where parties intend to submit a statement of claim. Given this, the Decree may effectively change the way arbitrations are conducted in Indonesia going forward.

A New Push to Regulate E-Commerce

On 19 May 2020, the Ministry of Trade issued Regulation No. 50 of 2020 on the Requirements regarding Business Licensing, Advertising, Development, and Supervision of Businesses in Commerce through the Electronic Systems. This regulation is an implementing regulation of the E-Commerce Regulation (Government Regulation No. 80 of 2019 on Commerce through Electronic Systems), which clarifies most of the unresolved issues in the E-Commerce Regulation.

The new regulation regulates the appointment of representatives by foreign e-commerce service providers and business licenses for local merchants, e-commerce service providers, and intermediary service providers.  It also clarifies the requirements for electronic advertisements and the obligation to prioritise local products and services.

OJK Moves to Regulate Trustee Agreement for Debt Securities or Sukuk

ln late April this year, OJK issued Regulation No. 20/POJK.04/2020 on Trustee Agreement for Debt Securities or Sukuk, to regulate trustees in debt securities and sukuk issuance. This regulation revokes and replaces Bapepam-LK Regulation No. VI.C.4 on the General Provisions and Trustee Agreement for Debt Securities. 

This Update provides a summary of the following key features of the new regulation: 

  • Due diligence on issuer
  • Replacement of trustee
  • Profit sharing, margin and reward
  • Termination of duties and obligations of the trustee
  • Amendment to use of proceeds