I. Corporate liability deriving from criminal activity
1. Nature of the liability (criminal, administrative) and basis (crimes committed by directors or representatives, in the interest of or for the advantage of the company).
The Indonesian Criminal Code (ICC) does not acknowledge corporate criminal liability. As a general rule, criminal liability attaches to the individual person involved in the criminal act.
Criminal corporate liability is acknowledged only if provided by a specific law, such as the following:
- Law No. 5 of 1997 on Psychotropic (“Psychotropic Law”)
- Law No. 5 of 1999 on the Prohibition of Monopoly Practices and Unfair Business Competition (“Anti-Monopoly Law”)
- Law No. 8 of 1999 on Consumer Protection (“Consumer Protection Law”)
- Law No. 31 of 1999 on the Eradication of Corruption as lastly amended by Law No. 20 of 2001 (“Anti-Corruption Law”)
- Law No. 11 of 2008 on Electronic Information and Transaction (“EIT Law”)
- Law No. 8 of 2010 on the Prevention and Eradication of Money Laundering (“Anti-Money Laundering Law”)
- Law No. 35 of 2009 on Narcotics (“Narcotics Law”)Article 20 of the Anti-Corruption Law provides that a company may be held liable for corruption if the action is committed by people who, based on an employment agreement or other relationship, are acting in association with the company.
However, it is worth mentioning that from the aforementioned laws, only the Anti-Corruption Law and the Anti-Money Laundering Law provide clear guidelines on when a company may be held liable.
Article 20 of the Anti-Corruption Law provides that a company may be held liable for corruption if the action is committed by people who, based on an employment agreement or other relationship, are acting in association with the company.
Meanwhile, the Anti-Money Laundering Law provides more descriptive criteria in determining a company’s liability. Article 6 (2) of the Anti-Money Laundering Law stipulates that a company may be held liable for money laundering if the crime committed meets the following criteria:
- The offense was committed or instructed by the company’s management officers.
- The offense was committed to achieve the company’s business purpose.
- The offense was committed in accordance with the duties and functions of the doer or the instructor.
- The offense was committed with the intention of benefitting the company.
Just before the end of last year, the Supreme Court issued Supreme Court Regulation No. 13 of 2016 on the Procedure for the Handling of Criminal Cases Committed by Corporations (“SC Regulation”), which is intended to supplement laws that acknowledge corporate criminal liability. The SC Regulation is also intended to provide guidelines for law enforcement agencies in examining companies in an investigation of a criminal act, considering that the prevailing criminal procedural law in Indonesia does not address this issue.
The SC Regulation takes a similar approach with the Anti-Corruption Law in establishing criminal corporate liability. Article 3 of the SC Regulation stipulates that a crime is committed by a company if the crime is committed by people who, based on an employment relationship or other relationship, are acting for and on behalf of the company.
The SC Regulation further provides parameters for courts to assess the liability of a company in a criminal act. Article 4 (2) of the SC Regulation stipulates that in imposing penal sanction to a company, judges look for the following facts:
- Whether the company gained profit or benefit from the crime, or whether the crime was committed for the interest of the company
- Whether the company allowed the crime to take place
- Whether the company took preventive measures
2. Type of crimes/administrative offences from which, according to the legislature, corporate liability may arise
As corporate criminal liability is not acknowledged in the ICC but rather provided in various legislations, the type of crimes that give rise to the liability depend on each of these legislations, and the list could be extensive. For example, under the Anti-Corruption Law, there are roughly 30 acts defined as corruption, ranging from actions that cause loss to the state’s finances to conflict of interest in a public procurement process.
3. Identification of companies and entities to which liability may apply
The SC Regulation applies to any type of corporation, whether it is in the form of a limited liability company or a partnership. The SC Regulation does not differentiate between local and foreign corporations.
Further to that, under the SC Regulation, criminal liability can also be applied to a group of corporations. If a crime is committed by a corporation with its parent or subsidiary or other related corporations, they can also be held accountable for the crime, depending on their roles in the crime.
4. Corporate liability for crimes committed abroad by its representatives or subsidiaries
The available corporate criminal liability provisions do not specifically state that the liability will extend to crimes committed abroad by representatives or subsidiaries of an Indonesian company. However, as previously mentioned, the SC Regulation provides that a parent or subsidiary or other related corporations can also be held accountable for the crime, depending on their roles in the crime.
Further to that, from the language of the provisions in some of the laws that acknowledge corporate criminal liability, it can be inferred that an Indonesian company can also be liable for crimes committed abroad by its representatives or subsidiaries.
A few of the examples of these provisions are as follows:
- Article 2 of the EIT Law provides that the EIT Law applies to Indonesian and foreign individuals or legal entities and to all electronic transactions conducted inside Indonesia or outside Indonesia but having legal impacts in Indonesia, or having legal impacts outside Indonesia but detrimental to the interests of Indonesia.
- Article 16 of the Anti-Corruption Law provides that anyone outside Indonesia who provides assistance, opportunity, means or information to commit corruption will be sentenced with the same sanctions as the wrongdoer.
- Article 10 of the Anti-Money Laundering Law provides that anyone, whether an individual or a legal entity, who participates in the attempt, assisting with or conspiring for the act of money laundering will be sentenced with the same sanctions as the wrongdoer.
5. Corporate liability in the case of transactions taking place after the commission of a crime (acquisitions, mergers, demergers, etc.)
Various laws that acknowledge corporate criminal liability do not provide extensive provisions on corporate liability in case of transactions taking place after the crime. This is covered in the SC Regulation.
Article 7 (1) of the SC Regulation provides that in the event of a merger or consolidation, the surviving corporation bears the liability for any crimes committed before the merger or consolidation. However, the extent of the liability of the surviving corporation is not clear.
In the event of a spin-off, the liability may extend to either one of the corporations being spun off, or both, depending on their roles (Article 7 (2) of the SC Regulation).
If a corporation is in a liquidation process, the liability still lies with the corporation (Article 7 (3) of the SC Regulation). Thus, initiating liquidation does not free a corporation from its criminal liability. Criminal liability is only lifted once the corporation has been effectively dissolved, and in such a case, there can be no criminal liability. However, this does not stop the state from going after the liquidated assets. Assets alleged to have been used to conduct a crime or are the result of a crime can be chased. The claim for these assets is filed against the former management, heirs or third parties who control the assets of the liquidated corporation.
II. Applicable sanctions
1. Type of sanctions applicable to the company
The type of sanctions varies depending on the provision in each of the laws acknowledging corporate criminal liability. But in general, the sanctions can be divided into fines and additional sanctions, ranging from revocation of license, freezing of business units to confiscation of assets.
A few examples of these sanctions are as follows:
- Article 52 (4) of the EIT Law provides that fines will be imposed against corporations that commit crimes under the EIT Law. The amount of fines is two-thirds on top of the maximum fines imposed on individuals.
- Similar to the EIT Law, Article 20 (7) of the Anti-Corruption Law also imposes fines to corporations. The amount of fines is one-third on top of the maximum fines imposed on individuals.
- Article 7 (1) of the Anti-Money Laundering Law provides that the principal sanction to be imposed on corporations is fines up to IDR 100 billion (around USD 7.5 million). In addition to fines, the Anti-Money Laundering Law provides that additional sanctions can be imposed on corporations, particularly: (a) announcement of the court’s decision; (b) partial or entire freezing of the corporation’s business activities; (c) revocation of business license; (d) winding up or ban against the corporation (no specified terms on the coverage of the ban); (e) confiscation of the corporation’s assets for the state; and (f) takeover of the corporation by the state.
- The Consumer Protection Law takes the same approach as the Anti-Money Laundering Law. In addition to imposing fines, corporations that violate the Consumer Protection Law can be imposed with additional sanctions such as: (a) confiscation of certain assets; (b) announcement of the court’s decision; (c) compensation payment; (d) cease-and-desist order against the activity causing consumer loss; (e) product recall; or (f) revocation of business license.
2. Interim measures, cease and desist orders, bans and confiscatory measures
There are generally no interim measures available in most of the laws acknowledging corporate criminal liability, except for the laws relating to intellectual property rights. Under Supreme Court Regulation No. 5 of 2012 on Temporary Stipulation, the court can issue an interim measure against infringement of intellectual property rights based on an application by the intellectual property rights owner. The scope of the interim measures covers: (a) the prevention of entry of goods suspected as infringing intellectual property rights; (b) the securing, or prevention of elimination, of evidence by the infringer; and (c) the cessation of infringement to prevent further damages. However, to the best of our knowledge, while this regulation was enacted in 2012, there is yet an application for interim measures under this regulation to date.
On the other hand, cease and desist orders, bans and confiscatory measures apply in cases where the relevant laws regulate them. For instance, cease-and-desist orders can be imposed for crimes under the Consumer Protection Law but not for money laundering.
3. Liability of directors or managers for not having adopted (intentionally or negligently) measures for the prevention of the crime
While the SC Regulation provides that preventive measures are one of the parameters to assess a corporation’s liability, there is no provision, under either the SC Regulation or the various laws acknowledging corporate criminal liability, which specifies that directors or managers are liable for not having adopted measures to prevent the crime.
III. Measures and “models” of prevention and effects of the same on corporate liability and applicable sanctions
Indonesian laws do not recognize or regulate compliance “models.”
IV. Judicial proceedings to determine corporate liability
1. Court competent to decide the liability of and penalties applicable to the company
District courts generally have the jurisdiction to examine criminal offenses. However, there are specific courts that are established to examine and adjudicate particular criminal offenses. For example, the Corruption Court has jurisdiction on corruption offenses, the Tax Court handles tax offenses, while the Commercial Court hears cases of intellectual property infringements.
2. Possibility of the application of interim measures
Interim measures are generally not available for all criminal offenses that acknowledge corporate liability. As discussed above, only laws relating to intellectual property rights have interim measures. To date, however, we have yet to see any application for interim measures relating to the infringement of intellectual property rights.
3. Plea bargains and related effects on the corporate liability
Indonesia does not acknowledge the concept of plea bargains.
4. Permanence of corporate liability if the crime is extinguished
The prevailing laws and regulations do not provide express provision on whether a corporation’s criminal liability remains if the crime is extinguished.
V. Corporate liability in multinational groups
1. Liability of parent companies located abroad in the case of offenses committed by directors, managers or representatives of the local company
The SC Regulation does not differentiate between local and foreign corporations. Given the broad definition of “corporation” and the non-differentiation of local and foreign corporations, the SC Regulation can also be applicable to foreign corporations. However, there may be issues on the jurisdiction of Indonesian law enforcement agencies over foreign corporations.
2. Basis of liability and applicable sanctions
The SC Regulation provides that if a crime is committed by a corporation by involving the corporation’s parent or subsidiary or other related corporations, they can be held liable for the crime, depending on their roles in the crime.
The applicable sanctions would be as set out in the relevant laws acknowledging corporate criminal liability.
VI. Significant case law concerning corporate liability arising from crimes and draft laws under discussion
1. Significant case law, if any
There have not been many case laws concerning corporate liability in Indonesia. This is mostly due to the absence of a procedural law before the SC Regulation was enacted, which made it challenging for law enforcement agencies to handle actions concerning corporate liability.
There was only one case where a corporation is convicted for a crime and charged with penal sanction. In the decision of the Banjarmasin District Court No. 812/Pid.Sus/2010/PN.Bjm dated 9 June 2011, PT Giri Jaladhi Wana, an Indonesian limited liability company, was named as defendant in a corruption case. The corporation was convicted for misappropriating funds that should have gone to the treasury of the city of Banjarmasin. The Banjarmasin District Court sentenced the corporation to pay IDR 1.3 billion in fines and an additional sentence of temporary closure for six months.
Another case law that is worth referring to prior to the SC Regulation is the corruption case in 2013 concerning PT IM2, a telecommunication services provider. PT IM2 was named as suspect in a corruption case in which PT IM2 was accused of using a 3G frequency network to provide internet services to its customers without the government’s approval. The president director of PT IM2 was found guilty of corruption. The court decision is silent on whether PT IM2 as a corporation was also guilty, but the court ordered the corporation to pay compensation to the state.
2. Proposed or contemplated new legislation
There is currently no proposed or contemplated new legislation for corporate criminal liability.