Client Alert 18 April 2012

Lawyers

 

Constitutional Court Ruling on Forestry Act of No Retroactive Effect

There has been some confusion in the plantation, forestry and natural resources industries following the recent decision of the Constitutional Court in Case No. 45/PUU-IX/2011, in which the court ruled that part of Article 1(3) of the Forestry Act (No. 41 of 1999) is unconstitutional.
Article 1(3) forms part of the “Definitions Section” of the Forestry Act, and defines what a “forest area” actually is. Thus, it goes to the very heart of the legislation, and has implications for practically every governmental action in the forestry sector. As such, it has been argued by a number of environmental organizations that the Constitutional Court’s ruling automatically avoids all legal instruments issued pursuant to the legislation since its enactment in 1999 as they were formulated based on a faulty definition of “forest area.”
Were this true, the economic consequences for Indonesia would be profound and urgent corrective action would need to be taken by the government in the form of a Government Regulation in Lieu of Law. (See end note [1]) However, it is our conclusion that this view is misconceived.
 
The Decision
 
The challenge to Article 1(3) was brought by five regents and a businessman from timber-rich areas of Central Kalimantan. The impugned article reads as follows: “A forest area is an area that is indicated and/or designated by the government for retention as permanent forest” (emphasis ours). In essence, the petitioners argued that the use of “indicated and/or” resulted in a lack of legal certainty as it was imprecise and conflicted with other provisions of the legislation. The court agreed and ordered that the offending phrase be excised from the article. As the court did not find the entire article unconstitutional, it still stands and now reads as follows: “A forest area is an area that is designated by the government for retention as permanent forest.”
Essentially, most of the confusion that has arisen centers on whether the decision is of retroactive effect, meaning that every legal instrument that has been issued since 1999 and which is related to the offending article would also be null and void.
 
Retroactivity
 
As regards the question of whether the ruling applies retroactively, that is to say, to decisions made prior to the court’s ruling, we are of the opinion that this is not the case. This is because Article 58 of the Constitutional Court Act  (No. 24 of 2003)  and Article 38 of Constitutional Court Regulation No.06/PMK/2005 expressly provide that legislation reviewed by the court remains in force until such time as a judgment is entered declaring that the legislation (or a part thereof) is repugnant to the Constitution. Furthermore, Article 47 of the Constitutional Court Act and Article 39 of Regulation No.06/PMK/2005 also expressly provide that the court’s decisions only enter into effect on the date of their pronouncement in open court. On that basis, it seems clear that decisions of the court are not retroactive in cases involving challenges to the constitutionality of statutes or statutory regulations. Furthermore, in Indonesian legal theory and practice, should legislation be repealed or be declared unconstitutional, all actions or policies that have been taken based on such legislation remains in effect.
 
The non-retroactivity of the Constitutional Court’s decisions on constitutional matters has been expressly affirmed by the court in a number of high-profile precedents, such as the Antasari case in November 2009:

Mr. Antasari had been removed from office as head of the Corruption Eradication Commission (KPK) under a provision of the KPK Act (No. 30 of 2002), which stipulated that a KPK commissioner would automatically be removed from office upon being prosecuted for a criminal offense. The court had earlier ruled that this provision was unconstitutional in a case involving two KPK commissioners, Mr. Bibit and Mr. Chandra, who had been similarly removed from office. Mr. Antasari argued that as the offending provision of the KPK Act had been struck down, he should now be restored to his former position. The court, however, refused to hear Mr. Antasari’s petition as he had been removed from office prior to Messrs. Bibit and Chandra and the ruling in that case could not be applied retroactively.

This view was reiterated by the Constitutional Court in 2010 in the Hendarman Supandji case:

The legitimacy of Hendarman Supandji’s appointment as Attorney General was challenged in the Constitutional Court by a former justice minister, Mr. Yusril Ihza Mahendra, who argued on a technicality that the Attorney General’s term of office had expired and that therefore decisions made by him were of no legal effect. While agreeing with Yusril that Supandji no longer held office as the Attorney General, the court stressed that all decisions made by him prior to the date of the judgment remained valid and binding.

However, as always in the law, there are exceptions. In a good example of judge-made law in Indonesia, the Constitutional Court has held on a number of occasions that a decision in a constitutional review case may apply retroactively, despite Articles 47 and 58 of the Constitutional Court Act, provided that this is necessary for the sake of legal expediency and certainty. However, in such cases the court will always make it clear that its decision is to be of retrospective effect.
No such pronouncement was made by the court in this case, and therefore it is clear that the Forestry Act decision is of prospective rather than retrospective effect. Accordingly, the decision only became applicable on 9 February 2012, the date on which it was handed down. Thus, every legal instrument issued pursuant to the Forestry Act prior to the handing down of the court’s decision continues to stand and is of valid legal effect. (See end note [2])

Conclusion
 
Overall, the Ministry of Forestry appears to be taking the matter lightly and has yet to issue a formal statement on the judgment. However, it is clear that it will need to amend the wording of many of the legal instruments it issues in the forestry sector, including decisions conferring rights over forestland, so as to take account of the Constitutional Court’s ruling.
On a more general note, as with many of the controversies and polemics that arise in Indonesian law from time to time, much confusion could have been avoided in this case through tighter legislative drafting. The use of “and/or” is a continuing source of confusion in the law, and appears on many occasions to be little more than a habit, without any thought being given to the actual linguistic implications and consequences on the ground.
 
____________________________________________
[1] A “Government Regulation in Lieu of Law” or “Emergency Government Regulation” is a regulation issued by the government that temporarily has the power of law. It must be submitted to the House of Representatives (DPR) for ratification as law within a period of two years. Should the DPR approve it, then it will be enacted as a statute. Otherwise, it will automatically stand revoked. Such emergency regulations are normally issued to fill a legal vacuum or in particularly pressing circumstances.
[2] See the Constitutional Court’s decisions in Case Number 110-111-112-113/PUU-VII/2009 and Number 5/PUU-IX/2011.

***

 

AHP Client Alert is a publication of Assegaf Hamzah & Partners. It brings an overview of selected Indonesian laws and regulations to the attention of clients but is not intended to be viewed or relied upon as legal advice. Clients should seek advice of qualified Indonesian legal practitioners with respect to the precise effect of the laws and regulations referred to in AHP Client Alert. Whilst care has been taken in the preparation of  AHP  Client Alert, no warranty is given as to the accuracy of the information it contains and no liability is accepted for any statement, opinion, error or omission.

Download

AREAS OF PRACTICE

  • Pic Mgmt

    Capital Markets

    As a full-service firm, we do a broad range of transactions covering the entire spectrum. Many are high profile and cement our position as a top-tier firm, including global equity offerings in reliance on Reg. S/Rule 144A, private placements, rights issues and other share-related offerings, such as convertible and exchangeable bonds. We also frequently advise on foreign offerings by issuers having significant interests in Indonesia, bond issuances under global offering rules, mergers, acquisitions, combinations of acquisitions and IPOs, consent solicitations and exchange offers of debt instruments listed on the Indonesia Stock Exchange or offshore. more »

  • Pic Mgmt

    Banking & Finance

    We are a leading force in the Indonesian banking & finance sector, advising on all manner of structured financing transactions, from simple secured or unsecured bilateral lending to multifaceted and complex credit facilities. We handle syndicated, club and bilateral loan documentation; project finance; property finance; acquisition finance; securitization and structured finance; regulatory and compliance issues; banking documentation and legal due diligence reporting. more »

  • Pic Mgmt

    General Corporate/M&A

    Our General Corporate/M&A practice provides advice on corporate governance, compliance, negotiating and drafting agreements, transaction structure, management and succession, legal due diligence reporting, formation of new entities, preparation of internal corporate documents and approvals, and completion of regulatory filings. With a wealth of experience amassed over the years in a wide variety of industries, we are strategically placed to provide you with everything you need to satisfy your corporate or M&A needs. more »

  • Pic Mgmt

    Debt & Corporate Restructuring

    We offer a full range of services in the debt & corporate restructuring arena, including advice on capital reduction, recapitalization and rescue schemes, financial sector takeovers, global asset recovery measures, mergers, creation of new entities, compromise schemes, demergers, buyouts, preparing documents and agreements, and ensuring statutory and regulatory compliance. As an AHP client, you will benefit from the unparalleled expertise gained by many of our senior lawyers as advisors or counsel to the Indonesian Bank Restructuring Agency (IBRA), which restored the country’s banking sector to health in the wake of the Asian financial crisis of 1997/98. more »

  • Pic Mgmt

    Foreign Direct Investment

    As an Indonesian law firm, we are obviously very much at home in our own jurisdiction, and so are able to make you feel at home as well. We know how things work in Indonesia, and have excellent relations with all the relevant government and regulatory agencies. We advise on the establishment of foreign investment companies, permanent business establishments, subsidiaries and joint ventures under the Indonesian FDI regime, merger & acquisition issues, foreign ownership caps, manpower issues, regulatory and environmental compliance, land acquisition, taxation matters -- in fact, everything you will need to get your venture off the ground and to keep it running smoothly throughout the investment lifecycle. more »

  • Pic Mgmt

    Competition Law

    We are widely recognized as being at the forefront of competition law in Indonesia, a rapidly developing field in which we have been instrumental in securing a number of ground-breaking judicial precedents in recent years. We consistently focus on the practicality and commerciality aspects, and combine legal expertise with in-depth experience across a wide range of industries so as to support the achievement of your strategic goals. more »

  • Pic Mgmt

    Dispute Resolution

    AHP has a very strong litigation team made up of one partner and 15 associates, all of whom are licensed advocates. We regularly represent clients in tort, contract, employment, internal corporate fraud, real estate, trademark and intellectual property disputes, to name but a few, with our primary focus being on commercial disputes. In the arbitration field, we have developed a formidable reputation for expertise and successful outcomes with the result that AHP advocates regularly appear before the Indonesian National Arbitration Board (BANI), as well as overseas arbitration bodies, such as the Singapore International Arbitration Centre. more »

  • Pic Mgmt

    Energy, Oil and Gas

    Our Energy, Oil and Gas practice provides top-quality legal advice and transactional support to domestic and international companies operating in the oil and gas, geothermal and renewable energy sectors. As a relatively compact firm, we are able to offer advice across the entire range of practice areas, thereby allowing us to deliver outstanding legal and commercial results for our clients in a practical and cost effective way. more »

  • Pic Mgmt

    Projects & Natural Resources

    As an Indonesian law firm, we know our country, our regulatory environment and our governmental system. Armed with this knowledge, we have garnered a wealth of experience down the years guiding both domestic and international companies through areas that are often fraught with competing interests and controversy. This experience provides us with the expertise and breadth of vision needed to ensure successful outcomes for your business objectives. In doing so, we offer a comprehensive suite of services, all of which dovetail seamlessly one with the other so as to provide holistic solutions to all your legal needs. more »

  • Pic Mgmt

    Telecommunications & Media

    Indonesia has seen exponential growth over the last decade in both the telecommunications and media sectors -- both areas in which AHP is in the vanguard of legal development. Besides having a professional interest in the two sectors, all of our lawyers in the T&M practice share a genuine passion for what they do and are therefore able to offer a combination of solid technical legal knowhow and an excellent understanding of the industries, the technical aspects, the principal factors at work, and the key players in Indonesia. more »

  • Pic Mgmt

    Real Property

    We offer a full range of real property services, including assisting with purchase and sale agreements, leasing agreements, title searches and registrations, conveyancing, and real property dispositions and bequests,.We also provide effective and reliable advice on the complex rules governing property ownership by non-nationals in Indonesia, an area of the law that is set for liberalization in the near future. more »

  • Pic Mgmt

    Intellectual Property

    Our IP practice offers trademark, copyright, patent and design searches and registration, and regularly mounts successful challenges on behalf of clients against decisions of the trademark authorities. Our IP associates are all members of key associations and are frequently engaged to speak at international events as recognized leaders in the field. Combing cutting-edge expertise and a high level of commercial acumen, we take pride in our results and a high level of customer satisfaction, and do our utmost to help ensure the protection of your rights and your peace of mind. more »

  • Pic Mgmt

    Islamic Finance

    At AHP, we understand Islamic finance and have been in the vanguard of the sector’s rapid expansion and development in Indonesia. With an in-depth understanding of the religious and conventional legal principles that underpin the Shariah sector, we believe we are uniquely well-positioned to offer expert and innovative advice on how to conduct any transaction in a Shariah-compliant manner, and to provide the kind of end-to-end solutions that you need. more »

  • Pic Mgmt

    Shipping & Aviation

    As an archipelagic nation, the shipping and aviation industries are of the utmost importance to the Indonesian economy. To accommodate the needs of ship owners, charterers, and marine insurers, we provide advice on all aspects of shipping law, including ship finance & security, sale and purchase, disputes arising out of charter parties, bills of lading, insurance, and collisions, and all other admiralty matters, while in the aviation sector, we assist with aircraft financing, sale and purchase, statutory obligations related to aviation, aviation safety and the aftermath of aviation accidents. more »

  • Pic Mgmt

    Labor Law

    We have a outstanding record in representing both individuals and corporations in employment matters, and in general advisory work on the complex rules governing the employment of expatriates in Indonesia. On the litigation front, we are frequently called upon to advise in cases involving internal fraud and embezzlement, and on the remedies available to employers. We also offer expert advice on employee compensation and incentive schemes (stock options, benefits, allowances), the employment implications of mergers, acquisitions and amalgamations, and the rights and benefits available to employees upon termination. more »

Assegaf Hamzah & Partners