The Indonesian Minister of Public Works and Housing ("MOPWH") has issued MOPWH Regulation No. 11 of 2021 regarding the Procedure and Technical Guidelines for Construction Dispute Adjudication Board ("Regulation 11/2021"), which provides a comprehensive framework for the use of Dispute Adjudication Boards ("DAB") in the construction industry. The regulation applies to ministries, regional governments, and construction service providers. It establishes the obligation to use DAB in certain contracts involving construction services funded by domestic or foreign loans or grants. It also sets out mandatory qualifications for DAB members and outlines the procedure for dispute resolution through adjudication. However, the regulation does not address the issue of enforcement, and parties may need to resort to arbitration to enforce DAB decisions.
While Regulation No. 11 of 2021 provides clear guidelines for the use of DABs in Indonesia's construction industry, the lack of a direct enforcement mechanism for DAB decisions poses challenges. Parties may need to include specific contractual provisions regarding the consequences of non-compliance with final and binding DAB decisions. Overall, stakeholders in the construction industry should be aware of and comply with the regulations when drafting construction contracts or DAB agreements to ensure effective dispute resolution and adherence to prescribed procedures.
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The Minister of State-Owned Enterprises in Indonesia has issued the BUMN Omnibus Regulations, consolidating and integrating over 45 ministry-level regulations to synchronise the regulations pertaining to state-owned enterprises. The regulations aim to support the integrated and sustainable management of these enterprises. The BUMN Omnibus Regulations consist of three ministry-level regulations, covering special assignments and environmental social responsibility programmes of state-owned enterprises ("Regulation 1/2023"), guidelines for governance and significant corporate activities of state-owned enterprises, and state-owned enterprise organisation and human resources.
The first regulation, Regulation 1/2023, focuses on special assignments of state-owned enterprises and introduces new provisions. It outlines the planning, government's determination, implementation, and reporting aspects of special assignments. It also addresses the environmental and social responsibility programmes, including micro and small business financing. The regulations provide clarity on the legal form of special assignments and introduce reporting obligations for state-owned enterprises.
These regulations aim to enhance the management and accountability of state-owned enterprises and promote their role in supporting economic development and social welfare. They provide guidance for state-owned enterprises and their subsidiaries, helping them navigate their special assignments and fulfil their environmental and social responsibilities.
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The Indonesia Competition Commission ("KPPU") has recently issued three new guidelines aimed at improving competition enforcement in the country. These guidelines cover various aspects of competition cases, including the definition of relevant markets in the digital economy, the measurement of negative impacts and corresponding fines for antitrust violations, and bid-rigging practices. The guidelines provide valuable insights into KPPU's views and methods, assisting both KPPU and the public in understanding competition issues more effectively.
The first guideline, the Relevant Market Guideline, introduces updated rules for defining relevant markets, especially in the context of the digital economy. It recognises multi-sided markets and the specific considerations involved in analysing them. The second guideline, the Negative Impacts Guideline, establishes criteria and indicators for measuring the negative impact of monopolistic practices and unfair competition. It emphasises the assessment of unreasonable prices and adopts a case-by-case approach. Lastly, the Bid Rigging Guideline addresses bid-rigging practices and introduces a new scheme that expands the range of parties involved. It acknowledges the use of indirect evidence, including algorithmic evidence such as the Bid Rigging Indicator Analysis System (BRIAS).
These guidelines signify KPPU's commitment to data-driven and quantitative-based approaches in competition enforcement. Businesses may wish to revisit their competition law training and procurement policies to ensure compliance and align their strategic decisions with the evolving landscape. It is particularly important for businesses to be aware of the impact of these guidelines on their market positioning, and to consider revising their procurement policies to ensure compliance with competition rules in Indonesia.
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The Indonesian Constitutional Court recently received two constitutional review petitions regarding Law No. 27 of 2022 on Personal Data Protection ("PDP Law"). The petitions sought to declare specific articles of the PDP Law as unconstitutional. One petition questioned the classification of legal entities as controllers, while the other focused on the limitations of data subjects' rights related to defence and national security. However, the Court ruled that the provisions in question were valid and consistent with the Constitution.
In its rulings, the Court clarified certain aspects of the PDP Law. It emphasised that personal and household data processing activities conducted for non-commercial purposes are exempt from the PDP Law. The Government provided guidance on the criteria for this exemption. Additionally, the Court addressed the restrictions on data subjects' rights in the context of defence and national security, highlighting that data processing must align with legislative requirements governing defence and national security.
These rulings provide valuable guidance and enhance the understanding of the PDP Law. While awaiting the issuance of implementing regulations, the rulings contribute to the effective implementation of the PDP Law and empower stakeholders to navigate data protection regulations in Indonesia more confidently.
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The Indonesia Competition Commission ("KPPU") has introduced a new case handling procedure through KPPU Regulation No. 2 of 2023 on Case Handling Procedure ("New Regulation"). One notable change is the allowance for reported parties to propose a change of behaviour during the investigation stage instead of going through a preliminary examination hearing. If the proposed change is accepted by KPPU and fully implemented by the reported party, the investigation may be dismissed, and no sanctions will be imposed. Previously, a change of behaviour required an admission of guilt and agreement from all reported parties. However, the New Regulation no longer necessitates unanimous agreement among reported parties during the investigation stage. Additionally, the New Regulation provides more detailed technicalities regarding evidence, expands the definition of witnesses, requires company directors to represent business entities during testimonies, and imposes a requirement for all documents submitted to KPPU to be in Bahasa Indonesia.
The introduction of the change of behaviour option during the investigation stage offers reported parties the opportunity to halt the case earlier and potentially minimise adverse impacts such as negative publicity and higher legal costs. However, caution should be exercised as the proposed change must meet specific requirements for KPPU approval and case dismissal. If the proposal is rejected during the investigation stage, another change of behaviour proposal cannot be submitted during the subsequent preliminary examination hearing. Businesses should therefore be prudent in fulfilling the change of behaviour requirements during the investigation stage.
Overall, the New Regulation takes a more stringent approach to case handling procedures, potentially posing technical challenges for reported parties as they navigate through cases under the New Regulation.
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The Indonesia Competition Commission ("KPPU") has introduced a new merger control regulation, KPPU Regulation No. 3 of 2023 on the Assessment of Merger, Consolidation, or Acquisition of Shares and/or Asset that could Result in Monopolistic and/or Unfair Business Competition Practices ("New Merger Regulation"), which came into effect on 31 March 2023. The New Merger Regulation brings significant changes to the notification requirements for foreign-to-foreign merger transactions. Notification to KPPU is now required only if both parties involved in the transaction have assets and/or generate sales in Indonesia. Additionally, asset value calculations for the threshold analysis will be based on the Indonesian basis instead of a worldwide basis. The New Merger Regulation also implements an online filing system, shorter review periods for document completeness, and a comprehensive assessment hearing for transactions that may result in a significant change in market concentration.
In conjunction with the New Merger Regulation, the Government has introduced a filing fee for merger notifications through Government Regulation No. 20 of 2023 on Types and Tariffs of Non-Tax State Revenue Applicable to the Commission for the Supervision of Business Competition. The fee, calculated based on the lower value of assets or sales turnover, is payable if KPPU finds the transaction to be notifiable. However, provisions exist for reducing or fully waiving the filing fee under certain circumstances, such as supporting the development of micro, small, and medium enterprises or due to force majeure events. Businesses should be aware of the stricter administrative requirements introduced by the new regulation, including the need to file notifications online and ensure accurate information and document submission. Early assessment and compliance with the notification obligations to KPPU are strongly recommended to navigate the new regulatory landscape effectively.
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The Financial Services Authority ("OJK") of Indonesia has taken significant steps to boost the digital banking transformation in the country. In line with this goal, OJK Regulation No. 11/POJK.03/2022 on the Implementation of Information Technology by Commercial Banks was issued last year, addressing various aspects such as data, technology, risk management, collaboration, and institutional setting. As a follow-up to this regulation, Circular Letter No. 29/SEOJK.03/2022 on Cyber Security and Resilience for Commercial Banks ("Circular") has been introduced. The Circular emphasises the importance of cyber security and places the responsibility on banks to assess their cyber security risk annually, report their self-assessed ratings, and establish dedicated cyber security units.
Under the Circular, banks are required to conduct assessments of inherent risk and cyber security maturity to determine their cyber security risk level. The results of these assessments must be reported to OJK, along with regular cyber security testing. Additionally, banks must establish independent cyber security units to manage cyber security and coordinate cyber incident response teams. While some market players view the requirements under the Circular as reasonable for effective risk management, challenges may arise in implementing certain aspects, particularly those related to human resources for the cyber security units. The success of these regulations will depend on customer awareness and participation in preventing cyber security threats, and it remains to be seen if similar standards will be adopted by non-bank financial services and other industries in the future.
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