On 25 November 2021, the Constitutional Court declared that the Job Creation Law 2020 was conditionally unconstitutional and instructed the government to revise the law within two years (ie, before 25 November 2023).
The Court declared that the Job Creation Law violated the Constitution 1945 and would not have legal binding power if "no revision is made within 2 (two) years since the decision is declared". However, the Court stated that the Job Creation Law is still valid until the revision is made. The Court instructed lawmakers to revise it within two years – if no revision is made, the Job Creation Law will become permanently unconstitutional.
The Court emphasised that if the Job Creation Law becomes permanently unconstitutional, the laws, clauses or contents of any laws that were revoked or amended by the Job Creation Law will become effective again. It also instructed the government to postpone all strategic actions and policies that would have a wide impact and not to enact any new implementing regulations in relation to the Job Creation Law.
This decision was not unanimous: only five out of nine judges supported the argument that the Job Creation Law was conditionally unconstitutional. The remaining four judges, which are further split into two groups of two judges in terms of their reasoning, did not support it.
The first group of five judges emphasised the importance of compliance with the Law on Formation of Laws (and regulations) 2011. These judges held that:
- the formation of the Job Creation law violated the standard procedure regulated under the Law on Formation of Laws;
- the "omnibus method" is not recognised under the Law on Formation of Laws;
- the formation of the Job Creation Law did not comply with the principle of clarity of purpose and clarity of content; and
- the formation of the Job Creation Law did not provide optimal participation from the public.
Accordingly, the first group of five judges declared that the Job Creation Law was formally defected.
Of the second group of judges, the first two supported the progressive law concept that is related to thinking outside the box and is free from conventional legal traditions. They argued that:
- law is for society, not the other way around. Therefore, the "rule breaking" of the Job Creation law was justified as part of a progressive paradigm; and
- the Law on Formation of Laws does not explicitly prohibit the omnibus method and therefore it should be justified so long as it does not violate the "Pancasila" (ie, an Indonesian theory based on five principles) and the principles contained in the Constitution 1945.
The final group of two judges had seven reasons to support the Job Creation Law, including that the Court should not ignore the fact that the existing regulations overlapped, causing sectoral and legal uncertainty in their application.
The government's actions remain to be seen. The two-year period is not long – it may not be enough to revise the formal defect. Even if the government succeeds in revising the defects, a risk still remains that a new application to formally review the revised Job Creation Law will be lodged.
Further, it is unclear how the government will rectify the defect. The four arguments by the first group of judges refer to the violation of procedure, the violation of the principles of the formation of law and the insufficiency of public participation. Amending the existing Law on Formation of Laws to include the omnibus law method, reassessing the Job Creation Law by providing wider public participation and repromulgating it would be a lengthy and costly process – not only to the government, but also to the public.
No implementing regulations can be issued, so it is unclear what will happen if the Job Creation Law's provisions require further regulation, and how businesses affected by the Job Creation Law should be operating while waiting for the revision. The government has acted quickly and has enacted many implementing regulations, but the people are still adapting to them. Local governments in Indonesia might not yet have considered such new regulations, especially with regard to their own local regulations. Now, while still adapting and learning, the people face uncertainty as to whether the Job Creation Law will be valid after two years or whether it will be nullified.
The court's decision is historic and important – the government will need to learn from it the hard way. The government should rectify the issue immediately to avoid causing further legal uncertainty, which is bad for business.
For further information on this topic please contact Eddy Leks at Leks & Co by email ([email protected]). The Leks & Co website can be accessed at www.lekslawyer.com.