Government authorities

Relevant authorities

What are the relevant government agencies or departments with authority over projects in the typical project sectors? What is the nature and extent of their authority? What is the history of state ownership in these sectors?

The relevant authorities are:

  • energy sector: Ministry of Energy and Mineral Resources; specifically for power with a BOOT scheme, PT Perusahaan Listrik Negara (Persero), a state-owned company that will become the sole off-taker;
  • transportation (ports, airports, railways): Ministry of Transportation;
  • water, waste management and toll roads: Ministry of Public Works and Housing; and
  • telecommunications (eg, satellites, underground cables): Ministry of Communications and Information.

Legal issues of general application

Government permission

What government approvals are required for typical project finance transactions? What fees and other charges apply?

The transaction documents do not need to be registered with any governmental body. However, upon the signing of the transaction documents, the borrower must report to Bank Indonesia and the Minister of Finance and must provide a copy of the main finance documents (eg, common terms agreement). There is no fee or other charges that apply for the report.

There is no requirement under Indonesian law to have the finance documents governed by Indonesian law. Therefore, it is common in Indonesia to have the finance documents governed by foreign laws (usually English law or New York Law).

Registration of financing

Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?

There is no specific registration required with government authority or legal formalities other than those that have been mentioned above (reporting to Bank Indonesia and the Minister of Finance, documents to be made in notarial deed form, etc).

There is a language requirement applicable in Indonesia. Law No. 24 concerning Flag, Language, National Emblem, and National Anthem and its implementing regulation, Presidential Regulation 63/2019 on the Use of Indonesian Language (Language Regulations) provides, among other things, that a memorandum of understanding or an agreement between Indonesian individuals or Indonesian legal entities must be set out in the Indonesian language and, if it involves a foreign entity, such memorandum of understanding or agreement may also be set out in the national language of such foreign party or the English language.

Based on the Language Regulations, the parties are free to choose the version that will prevail should differences or inconsistencies be found between the Indonesian language version and the foreign language version of an agreement entered into between foreign parties and Indonesian parties.

There has been a court case that invalidated agreements on the basis that the agreement was only executed in the English language and that the parties did not prepare and execute an Indonesian language version of the agreement. Indonesian law does not adopt the concept of precedence, and there is in principle no obligation for other courts in Indonesia to follow previous court decisions. However, these court decisions serve to demonstrate how other courts may interpret the regulations and may be taken into account by the courts in Indonesia when making decisions in similar cases.

Arbitration awards

How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?

Indonesia is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (ie, the New York Convention). Therefore, international arbitral awards (including English or New York arbitral awards) are enforceable under Indonesian law. The award becomes enforceable after an Indonesian court validates the award by issuing a writ of eksekuatur (a court order).

Labour disputes and disputes related to licences, permits or governmental approvals are not arbitrable under Indonesian law.

In the oil and gas sector, the regulation requires that for certain contracts or agreements (such as an engineering, procurement, and construction contract), if arbitration is chosen as the dispute resolution forum, it must be referred to domestic arbitration via Badan Arbitrase Nasional Indonesia.

Law governing agreements

Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?

Typically, project agreements are governed by Indonesian law. Certain project agreements whose performance does not have to be conducted in Indonesia, such as offshore supply contracts or technical services agreements, are typically governed by foreign law.

Except for Indonesian security documents, the financing agreements are typically governed by foreign law.

Matters that involve performance by the parties or are related to the financing and security upon assets that are located in Indonesia are all conducted in Indonesia. Certain contracts, such as for construction, are required by law to be governed by Indonesian law.

Submission to foreign jurisdiction

Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?

In general, a party’s submission to a foreign jurisdiction and waiver of immunity is generally legally binding and enforceable. However, a foreign court decision is not enforceable within Indonesia. The judgment can be used as evidence in a retrial of the merits of the case, but subject to the prevailing laws and regulations. Indonesia is not a party to any treaty, convention or bilateral agreement that recognises the enforcement of a foreign court judgment.

Environmental, health and safety laws

Applicable regulations

What laws or regulations apply to typical project sectors? What regulatory bodies administer those laws?

Environmental matters in Indonesia are generally governed by Law No. 32 of 2009 on Environmental Protection and Management (Environmental Law). The Environmental Law was enacted for the purpose of protecting Indonesian territory from environmental pollution and damage. In light of this, the Environmental Law requires any business activity conducted within Indonesia to comply with the requirement to prepare environmental impact analysis documents that must be approved by the Minister of Environment and Forestry, Governor, Mayor or Regent (depending on the activities and coverage area of the project). The project company must also obtain an Environmental Permit issued by the Minister of Environment and Forestry, Governor, Mayor or Regent (as applicable).

Normally the oil and gas, power and mining sectors are also subject to Government Regulation No. 101 of 2014 on Management of the Waste of Hazardous and Toxic Materials, which requires that every company conducting business activities using or producing hazardous and toxic materials (locally known as B3) perform B3 waste reduction, B3 waste processing or B3 waste land-filling and obtain a B3 Waste Management Permit.

In respect of health and safety, the project company must prepare occupational health and safety guidelines pursuant to Law No. 1 of 1970 on Work Safety. Further, each industry sector also has its own safety regulations. However, the general requirement is that every installation, as well as all equipment and machinery used by a company, must have certificates of worthiness.

In the context of infrastructure projects, the relevant government bodies that oversee environmental health and safety in Indonesia are the relevant local government, the Ministry of Environment and Forestry, the Ministry of Energy and Mineral Resources and the Ministry of Human Resources.