New whistleblower regulation

One of the things that often surprises outside observers of graft in Indonesia is the comparative rarity with which complex, multilayered schemes of corruption are uncovered through the action of whistleblowers, despite such schemes frequently involving large numbers of participants.

In order to encourage more whistleblowers to come forward, and greater public participation in the fight against corruption overall, on 18 September 2018 the Government issued Government Regulation No. 43 of 2018 on Public Participation in the Prevention and Suppression of Corruption (“GR 43/2018”), which revokes and supersedes an earlier but rarely used instrument dating back to 2000: Government Regulation No. 71 of 2000 (“GR 71/2000”).

GR 43/2018, which applies to whistleblowers in both the public and private sectors, gives members of the public the right to “seek, obtain and provide information related to suspected corruption”. A whistleblower whose report proves to be well-founded, as evidenced by a final and conclusive judicial decision, is entitled to receive 2 percent of the total state losses that are recovered, up to a maximum of Rp 200 million (approximately USD13,500). Should the act of corruption involve a bribe, the whistleblower is entitled to receive 2 percent of the value of the bribe and/or liquidated value of seized goods that are disposed of at auction, up to a maximum of Rp 10 million.

In our opinion, GR 43/2018 is unlikely to significantly encourage greater whistleblower participation in the fight against corruption as, for one thing, the cap on rewards of 2 percent of recovered state losses is precisely the same as under Government Regulation No. 71 of 2000. Further, GR 43/2018 actually reduces the incentives by imposing a cap of Rp 200 million on rewards, and only Rp 10 million in the case of a bribe. These limits did not appear in GR 71/2000. Given the dire consequences that could await whistleblowers in terms of their personal safety, the possibility of punishment through the misplaced use of the criminal defamation law, and doubts over the reliability of witness protection guarantees, it would be a brave soul indeed who would take the plunge based on the incentives provided in GR 43/2018.

KPK brings its first-ever prosecution of a corporation for corruption

In another matter, the Corruption Eradication Commission (KPK) in early October 2018 brought its first-ever prosecution against a corporation, PT Duta Graha Indah (now PT Nusa Konstruksi Enjiniring Tbk), for its alleged involvement in a rigged tender for the construction of Udayana University Hospital in Bali. The case, which dates back to 2009-2010, is said to have inflicted Rp 25 billion in taxpayer losses.

The lack of action against corporations by the KPK in the past was primarily due to a long-standing weakness in Indonesia’s criminal law, which is based primarily on the colonial-era Criminal Code (Kitab Undang-undang Hukum Pidana / KUHP). The KUHP confines criminal liability to “persons” (orang), which was traditionally interpreted in Indonesia as encompassing only “natural” persons (human beings), rather than “legal” persons (such as corporations).

Nevertheless, a raft of legislative enactments have been placed on the statute books in recent years that establish corporate criminal liability in specific sectors. Indeed, some of these statutes, for example, Law 31/1999 on the Eradication of Corruption (as amended by Law 20/2001), clearly define a “person” as not just encompassing individuals but also corporations.

Despite this, it proved very difficult to secure convictions against corporations due to continuing confusion and general disagreement over the scope of “person,” and the lack of specific procedure for handling corporate crimes.

With the country’s proposed new criminal code apparently going nowhere in the House of Representatives (DPR), the Supreme Court took the initiative by issuing Supreme Court Regulation No. 13/2016 on Procedures for the Handling of Corporate Crimes (“Reg. 13/2016”), which puts detailed rules in place governing (a) the nature of corporate criminal liability, (b) the investigation and trial of corporate offenses; and (c) the imposition of penalties on corporations.

What all this means for your company

With the issuance of Reg. 13/2016, errant corporations are much more likely, in the future, to find themselves in the dock. In order to avoid this, corporations should make all efforts to avoid becoming ensnared in corruption by, at a minimum:

(a) promoting a culture of honesty, probity, transparency and good corporate governance;

(b) establishing a robust compliance program (including a scheme that inspires the confidence of would-be whistleblowers), applicable at all levels of the company;

(c) diligently maintaining key material records and documentation.