E-Signature in the COVID-19 Crisis: Adapting to the (Not So) New Normal

As the COVID-19 pandemic forces people to adopt homeworking and physical distancing, digital transformation is no longer a mere option. In the past few months, we have witnessed how most businesses have departed from the traditional in-person meetings to virtual meetings, working through online collaborations, and hosting seminars and forums through digital means.

The signing of legal, commercial, and transactional documents is no exception. While gathering all relevant parties in the same room for signing is unfeasible, it is also considered out of fashion and impractical to rely on delayed postal service to circulate hard copy originals to obtain a wet ink signature. Therefore, one of the ways to overcome this issue is for businesses, governmental agencies, and legal practitioners to adapt by transforming or replacing the conventional use of wet ink signature with technology having similar legal robustness to the traditional signing mechanism, while still ensuring that legal documents are executed properly and in a timely manner.

This is where e-signature presents a welcome solution to the challenges of being bound to work from home, which certainly will remain part of our (not so) new normal lives.

Although regulations governing implementation e-signature have been in effect for several years, until the beginning of the pandemic, the use of e-signature is still not commonly adopted in our day-to-day course of business. Now, with a drastic shift to a remote working environment, the use of e-signatures provides a way to enhance efficiency and simplify work. But what is an e-signature and how legitimate is it? Are we to embrace the use of e-signature in every legal document and business transaction?

We have compiled below frequent questions commonly arising on the implementation of e-signature in Indonesia.

  • What is the difference between e-signature and the traditional handwritten (wet ink) signature? Will e-signature be legally binding?

E-signature is generally regulated under Law No. 11 of 2008 as amended by Law No. 19 of 2016 on Electronic Information and Transaction (the “EIT Law”) and Government Regulation No. 71 of 2019 on the Implementation of Electronic System and Transaction (“GR 71/2019”).

E-signature is defined as Electronic Information which is attached, associated, or related to another electronic information utilized as a means of verification and authentication. The current prevailing regulation recognizes various forms of e-signature, from electronically scanned signature, electronic handwriting font in the execution block or using a certified e-signature platform.

Despite its form, e-signature has the same legal standing as regular manual wet ink signature, provided that (i) e-signature data is related only to the signatory party; (ii) e-signature data is under the control of the signatory party during the signature process; (iii) all changes towards the e-signature occurred after the signing can be traced; (iv) all changes towards electronic information related to the e-signature occurred after the signing can be traced; (v) there are means to identify the signatory party; and (vi) there are means to demonstrate that the signatory party has consented to the relevant electronic information.

If all the conditions presented are met, e-signature is legally binding and has the same legal standing as regular manual wet ink signature, with its legal force and legal consequences.

  • What types of e-signature are governed under Indonesian Law?

There are two types of e-signature, namely certified and non-certified e-signatures.

Certified e-signature is an e-signature through a process of unique code generation as generated and certified by an Indonesian electronic certification provider. E-signature certification system can detect any change to the document, assuring both the validity of the signature as well as the integrity of the document.

Meanwhile, non-certified e-signature is rendered without using the services of any Indonesian electronic certification provider. This category includes digitalized version of a wet ink signature (e.g. through scanning process).

Both types of e-signatures are valid and legally binding. However, certified e-signature has stronger legal enforceability in the eye of the Indonesian court, compared to a non-certified e-signature.

  • Is it admissible in legal proceedings?

Yes, e-signature is admissible in legal proceeding. In fact, pursuant to Article 59 (3) GR 71/2019 in conjunction with Article 11 of the EIT Law, a document signed with a certified e-signature has valid legal force and legal consequences– equivalent to an authentic deed – when submitted as an evidence before a court. Meanwhile, submission of documents signed with non-certified e-signature as an evidence will require an authentication process through digital forensic examination. Once examined, the result will be conveyed in a forensic report and a digital forensic expert may also be called before the court to explain the result of the examination. Nonetheless, both types of e-signature are legally recognized by Indonesian courts.

As per July 2018, the Indonesian Supreme Court has also launched an e-Court application as an implementation of the Supreme Court Regulation No. 3 of 2018 on the Case Administrative Guidelines at Electronic Courts enacted in April 2018. The e-Court application accommodates parties to do e-Filing, e-Payment, e-Summons, and e-Litigation electronically. The Supreme Court has also collaborated with the Electronic Certification Agency (Balai Sertifikasi Elektronik – BsrE) of the National Cyber and Crypto Agency (Badan Siber dan Sandi Negara – BSSN) to secure the legality of the  documents used in the proceedings, including in providing e-signature services.

  • What documents can be signed electronically?

In general, any document can be signed electronically, and the signature will be deemed valid if it fulfills certain legal requirements. However, the foregoing may not apply in certain cases where certain formal requirements are needed. Pursuant to the provision of Article 5 (4) of the EIT Law, generally there are 2 (two) types of document that cannot be executed electronically, as follows:

  1. documents that, by law, should be made in a written form (hardcopy), for instance, commercial papers, marriage and birth certificates, etc.; and
  2. documents that, by law, shall be made in the form of notarial deed or by deed-granting officials, for instance, company’s acquisition deed or pledge of shares deed – both of which are required to be made in the form of notarial deed.
  • If the other party is from a different jurisdiction, can they sign electronically?

In general, if a document is not subject to any specific regulatory requirements, it is possible for a party from another jurisdiction to sign such document electronically. Please note, even if the e-signature is generated by a foreign certified e-signature provider, it will still be recognized in Indonesia as “uncertified e-signature”.  An e-signature will only be considered as a “certified e-signature” under Indonesian law if it is certified by an Indonesian electronic certification provider by using a certified e-signature producing device. However, the lack of certification thereof does not affect the validity of the e-signature itself.

One important note, e-signature may not be applicable for document that needs to be notarized and consularized in foreign countries.

  • Would a legal document governed under a foreign jurisdiction be valid if it is electronically signed using an Indonesian e-signature provider?

It varies over different jurisdictions. The validity of e-signature on legal document will depend on the laws and regulation respective to e-signature applicable in the relevant jurisdiction.

In Indonesia, for instance, while all e-signatures are legally valid, an e-signature will only be considered as a “certified e-signature” if it is particularly certified by an Indonesian certification company. On the other hand, in the United States, this will depend on the laws of each state. To the best of our knowledge, while some state laws in the United States acknowledge the validity of any type of e-signature, others require some form of security, and some will only acknowledge the validity of e-signature that uses encryption, depending on the types of transactions covered.

  • Is express language by the parties that consents to electronic transacting and acknowledges intent for the electronic signature to be binding necessary for the e-signature to be valid?

There is nothing in the current prevailing Indonesian laws and regulations that requires party to expressly state their intent to be bound by the provisions contained in a document signed electronically. The stipulation of Article 11 of the EIT Law is deemed to have provided sufficient ground for such e-signature to have the same legal force and consequences as wet ink signature and therefore will equally bind the parties in the transaction, regardless the existence of specific language in the document expressing the parties’ consent to be bound by the e-signature.

  • How does e-signature affect the meterai (stamp duty) requirement for certain legal documents?

E-signature can co-exist with meterai requirement. In essence, the obligation to affix meterai is related to a tax obligation, as opposed to the validity of such document. The signature in the document will still be legally enforceable and valid as long as it fulfills the requirement set forth by EIT Law and GR 71/2019. One may affix the meterai at a later stage in case the document is going to be submitted as an evidence in a court proceeding (Nazegeling).

The above, however, only applies when there is no formal procedure which requires affixation of meterai to conclude the document – for instance, submission of statement letter/document for certain license/application purposes.

  • The rise of e-signature certification amidst the COVID-19 pandemic

We have witnessed the pandemic to have served as a wake-up call for government and businesses to embrace digital transformation in carrying out their activities. It has brought a drastic shift to our way of doing business and we are seeing such changes becoming the “new normal”. We have seen various business associations pleading regulatory agencies to adopt e-signature, and in response, more initiatives have been launched by several governmental institutions to embrace the use of e-signature to minimize disruption in the course of business during the pandemic.  The Financial Services Authority (Otoritas Jasa Keuangan – OJK), for instance, now allows e-signature to replace wet ink signature on insurance products. We are hopeful that the current situation will encourage more and more parties, from lawmakers to business players, to adopt the use of e-signatures.

The following is the list of current certified e-signature providers in Indonesia registered with the Ministry of Communication and Informatics:

  1. Digisign – PT Solusi Net Internusa (certified);
  2. PrivyID – PT Privy Identitas Digital (certified);
  3. Perusahaan Umum Percetakan Uang Republik Indonesia (Peruri) (certified);
  4. VIDA – PT Indonesia Digital Identity (certified);
  5. BSrE BSSN (registered);
  6. Badan Pengkajian dan Penerapan Teknologi (BPPT) (registered).

 

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May 29, 2020

Copyright © 2020 AKSET. All rights reserved.


BPN Allows Ease to Extend Land Titles and Land Registration in Response to the COVID-19 Pandemic

The Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency (Kementerian Agraria dan Tata Ruang/Badan Pertanahan Nasional or “BPN”) issued its Decree No. 88.1/SK-HR.01/IV/2020 dated April 16, 2020 on Extension of the Validity of Land Titles and the Registration for Granting, Extension, or Renewal Decrees of Land Titles that Have Expired or Will Expire during the Coronavirus Disease 2019 (COVID-19) Emergency Status Period (“Decree 88/2020”). As a guidance to implement this Decree, BPN also issued its Circular Letter No. 7/SE-100.HR.01/IV/2020 dated April 17, 2020 on Ease of Granting and Registration Services of Land Titles during the COVID-19 Emergency Status Period (“Circular Letter 7/2020”). Both the Decree 88/2020 and the Circular Letter 7/2020 (collectively, “Land Services Policy”) apply retroactively to March 31, 2020.

Through the Land Services Policy, the BPN provides stimulus in the land sector to anticipate the economic fallout and to release the burden of land titles application during the COVID-19 pandemic by extending the duration of land titles validity and registration of granting, extension, or renewal decree of land titles up to December 31, 2020 and by simplifying the documentation requirement for registration of granting and/or transfer of right decree over land titles.

  • Granting Services of Land Titles

In the current exceptional circumstances, the BPN has shown its efforts in taking measures to avoid physical contact between BPN officials and applicants. Under the Land Services Policy, land titles that have expired or will expire as of March 31, 2020 are automatically extended up to December 31, 2020 without the requirement of following any registration procedures as should be carried out by the land titles owners.

The land titles applicable for this relaxation are limited to: (i) right to cultivate (hak guna usaha); (ii) right to build (hak guna bangunan); and (iii) right to use (hak pakai).

However, the Land Services Policy will not be applicable for land titles that expired before March 31, 2020.

In addition, the eligible land titles owners who wish to exercise their rights after December 31, 2020 should apply for an extension of land rights before December 31, 2020. Failure of such application will result in the expiration of the land titles.

  • Registration Services for Granting, Extension, or Renewal Decree of Land Rights

In addition to the above, BPN also extends the registration period for granting, extension, or renewal decrees of land titles that have expired or will expire as of March 31, 2020 up to December 31, 2020.

The eligibility consideration for this land relaxation measures as provided under the Land Services Policy is if it remains valid up to March 30, 2020.

Please note that land titles holders of granting, extension, or renewal decree should also register such decree before December 31, 2020 to avoid the decree being declared null and void. Should the decree become null and void, land titles holders will have to reapply for the granting, extension, or renewal decree to the BPN.

  • Documentation Requirement for Registration of Granting and/or Transfer of Right Decree over Land Titles

Previously, land titles holders were required to submit a validated evidence of Duty on the Acquisition of Rights over Land and Building (Bea Perolehan Hak Atas Tanah dan Bangunan or “BPHTB”) or income tax (pajak penghasilan or “PPh”) payment in order to complete the registration process of granting and/or transfer of right decree over land titles.

Given the urgency to ensure that social distancing is still carried out, BPN relaxes the document submission requirement so that land titles holders are no longer required to obtain validity of tax payment from the relevant tax offices prior to the registration of granting and/or transfer of right decree over land rights.

Pursuant to the Circular Letter 7/2020, BPN acknowledges that the following documents will suffice:

  1. BPHTB and/or PPh proof of payment; and
  2. Stamped statement letter in accordance with the format provided in the Circular Letter 7/2020.

This exemption is valid until December 31, 2020.

 

***

May 20, 2020

Copyright © 2020 AKSET. All rights reserved.


Personal Data Protection and Privacy: Indonesian Government Turns to Technology to Help Stop the COVID-19 Outbreak

As the number of COVID-19 cases keeps growing, many governments around the world turn to technology to press down the spread of the virus. These technologies serve various purposes, from digital health services to online community management.

The Indonesian government has also been using technology as part of the effort to fight COVID-19. For instance, the Executive Office of the President of Indonesia developed “10 Rumah Aman” Application as a tool to manage the public to stay at home or the modification of “Lancang Kuning Nusantara” Application by the Regional Police of Riau, which previously used to track wildfires and is now altered to track assistance distribution for people affected by COVID-19.

Another use of technology by governments to flatten the COVID-19 curve is the development of a digital contact tracing application. China and Singapore are two of the first countries to launch these contact tracing applications using big data on the movement of people by way of Bluetooth signal to trace if someone has been in close contact within the last 14 (fourteen) days with someone contracted by or suspected to have the COVID-19 virus. Not only the governments, Apple and Google as tech giants are also designing a similar tracking system for their mobile devices.

Learning from other jurisdictions’ experience that has successfully launched digital tracking application, the Indonesian government has recently launched a digital contact tracing application called PeduliLindungi.

  • How Digital Contact Tracing Application Works

In general, digital contact tracing applications will only work between users who have installed the application on their mobile phone. The application generally utilizes proximity data using Bluetooth technology. It often uses a randomly generated ID based on the device information as well as the registered name and active phone number (“Device ID”). If a user has been in close contact with COVID-19 patients or patients suspected to have the virus, the application will notify the user. Some applications will forward the information of the COVID-19 patients to health officials.

In collecting and processing the data, there are 2 (two) common models of digital contact tracing applications as follows:

  1. Centralized models. This model attempts to collect and centralize data by generating and keeping track of the users’ identifiers to construct the contact graph of a user in case they are infected. The generation of identifiers and generation of contact graphs are done on a server which will be controlled by the responsible institution(s). Thus, in the event that someone is tested positive for COVID-19, the application will upload the contact history log of such user, in which the authorized party would be able to match the identifiers with user records and contact people who had been in close contact with the patient.
  2. Decentralized models. In this model, the data will be kept on the devices as much as possible. It is aimed to strictly control data flows to avoid accumulating and collecting too much data on a centralized server. This means that a server exists but only to enable people to use their own devices to trace contacts. The server is not authorized to collect and store personal data, and it cannot use any identifiers to single out an individual, nor does it provide identifiers for users to broadcast. The key difference here is that the decentralized model will keep as much as data exclusively on the users’ device.

In some cases, a digital contact tracing application can also be equipped with a Past Movement Tracking feature. This feature collects and processes mobile location data generated by a phone’s interaction with cell towers, WiFi, Satelite, or be found in the form of metadata of call log or text log.

  • An Ideal Digital Contact Tracing Application from the Perspective of Indonesian Personal Data Protection Regime

Personal data, in essence, is any data relating to an identified or identifiable natural person – directly or indirectly.

Digital contact tracing application often uses the Device ID, in which it relates to one particular user as it was generated from the submitted name and active phone number. In addition, in the event that the application provides a past movement tracking feature or other feature with similar nature, the application will also collect and process mobile location data – which in itself relates to the users’ registered phone number as well as their location.

As digital contact tracing application uses and processes personal data, its operation shall comply and adhere to the personal data protection regime.

The utilization of a digital contact-tracing application to stop the spread of COVID-19 ideally should still consider and implement the following points:

  1. Use the safest and most appropriate model of digital contact tracing application by considering the prevailing data protection regulatory framework.
  • The centralized model can be more effective by nature, since it collects and analyzes more data centrally. However, in order for this model to safely secure the personal data, it would require a more matured and developed data protection regulatory framework to safeguard the security of the personal data – including its enforceability. This is in particular due to the high risk of unwanted misuse of data or even unlawful external breach when all of the data are pooled in a centralized server.
  • The decentralized model may be the safest approach for the protection of users’ personal data – from a technical standpoint. Using this model, there is no entity that can access a centralized/pooled personal data since the model will keep as much data on the users’ device as possible. This model, in a way, has built-in technical measures within the design of the application to safeguard the users’ data. In addition, it will also help to ensure that any collected data cannot be used for purposes other than to trace and track the spread of COVID-19.
  1. Comply with the rules and principles of the prevailing personal data protection regulatory framework. The following are several key provisions that must be taken into account when it comes to personal data processing activities:
  • Use the appropriate and available lawful grounds, e.g., consent, public interest, legitimate interest, or other grounds as provided by GR 71/2019 (lawfulness principle). Further, when using users’ consent, it must be noted that lawful consent must fulfill the criteria of unambiguous, freely given, specific, and informed.
  • Ensure that the application will only collect and process the personal data that are strictly necessary to achieve the purposes (data minimization principle).
  • Ensure that the personal data are only processed for the purposes which have been initially informed to the users (purpose limitation principle).
  • The responsible institutions must provide clear and sufficient information relating to the processing activities. For instance:
    • identify the responsible party in the operation of the application.
    • inform the purposes of processing and the scope of processing activities in a clear and sufficient manner.
    • provide sufficient detail and assurance on how the data will be adequately protected when it is shared with any third party.
    • provide a sufficient explanation and clarification on how the application actually works, e.g., whether the application strictly processes proximity data utilizing Bluetooth, or also track past movement based on mobile location data.
  • Ensure the accountability of the processing operation carried out by the application, inter alia, by keeping a record of every personal data processing activities (accountability principle).
  • Keep the collected personal data only for the necessary period of time, and store such data using the state of the art encryption technology to maintain its confidentiality. Further, since the application is dealing with sensitive information (i.e., health data), the responsible controller(s) of the data shall store it in a format which does not allow any direct identification during the retention period to prevent any unwanted leakage or misuse.
  1. Lastly, during the processing timeframe, it might also be necessary to periodically evaluate whether or not the proposed measure to use the application shall contribute to mitigate and limit the spread of COVID-19.

 

***

 

A digital contact tracing application may give an edge to the Indonesian Government in managing, preventing, and subsequently, stopping the spread of COVID-19 in Indonesia. However, while processing data plays a major role in formulating the right approach to manage the virus containment, it is paramount for the parties involved in this operation to ensure the adequacy of the protection towards individuals’ Personal Data by complying with relevant Personal Data protection rules and principles.

The assurance on complete compliance with the Personal Data protection regime will certainly help the Government to promote and urge our citizens to utilize a digital contact tracing application. The more users of the application, the more effective this application will be.

 

May 18, 2020

Copyright © 2020 AKSET. All rights reserved.


Are INGOs’ Operations Exempted From PSBB?

  • On Large-Scale Restriction Measures

Due to the current outbreak of the novel corona virus disease (“Covid-19”), the Government of Indonesia recently implemented the Large-Scale Social Restrictions (Pembatasan Sosial Berskala Besar or “PSBB”) with the issuance of the Minister of Health (the “MOH”) Regulation No. 9 of 2020 dated April 3, 2020 on Guidelines for Large-Scale Social Restrictions for the Acceleration of the Management of the Covid-19 (“Regulation 9/2020”).

Law No. 6 of 2018 dated August 8, 2018 on Health Quarantine (“Law 6/2018”) defines the PSBB as the restriction of certain activities of the residents in an area suspected to be infected by a disease (in our case, the Covid-19) and/or an area that is contaminated to a certain degree, in order to prevent the possibility of the spreading of the disease or the contamination (in this case, the Covid-19).

Following Regulation 9/2020 and MOH Decree No. HK.01.07/MENKES/239/2020, the Regional Government of DKI Jakarta Province implements the PSBB measures within the territory of DKI Jakarta based on the Governor Regulation No. 33 of 2020 dated April 9, 2020 on the Implementation of Large-Scale Social Restrictions for the Management of the Covid-19 in the DKI Jakarta Province (“Regulation 33/2020”). Under the DKI Jakarta Governor Decree No. 380 of 2020 dated April 9, 2020 on the Enforcement of the Implementation Large-Scale Social Restrictions for the Management of the Covid-19 in the DKI Jakarta Province (“Decree 380”), the PSBB is effective as of April 10, 2020 until April 23, 2020. The PSBB may be extended by the DKI Jakarta Governor for 14 (fourteen) days. Under the DKI Jakarta Governor Decree No. 412 of 2020 dated April 22, 2020, the PSBB in Jakarta is now extended until May 7, 2020 and shall be extended until May 21, 2020 in the event that there are still new cases of Covid-19.

The implementation of the PSBB includes: (i) schools and workplaces closure; (ii) restrictions of religious activities; (iii) restrictions of activities at public places or facilities; (iv) restrictions of activities in social and culture; (v) restrictions of modes of transportation; and (vi) restrictions of other activities specifically related to defense and security. Accordingly for the DKI Jakarta Province, under Regulation 33/2020, all “non-essential” businesses are required to temporarily suspend their activities at the workplaces. Regulation 33/2020 further elaborates that during the workplace closure, an employer shall replace the working process from workplace or offices to working from home.

There are certain categories that constitute “essential” businesses which are exempted from the workplace closure under Regulation 33/2020. One of the businesses which is exempted from the workplace closure is local and international social organizations (organisasi kemasyarakatan) that engage in the disaster and/or social sectors. In other words, local and international social organizations that engage in the disaster and/or social sectors whose offices are located within the DKI Jakarta Province may continue their operations, subject to certain protocols elaborated below.

  • Workplace Closure Exemption for International Non-Governmental Organizations

Please note that Regulation 33/2020 does not define or determine the scope of (i) local and international social organizations, and (ii) the disaster and/or social sectors.

Social organizations (organisasi kemasyarakatan) are defined in Law No. 17 of 2013 dated July 22, 2013 on Social Organizations as lastly amended by Government Regulation In Lieu of Law No. 2 of 2017 dated July 10, 2017 on Amendment of Law No. 17 of 2013 on Social Organizations (“Law 17/2013”) as organizations which are established and formed voluntarily by the society based on common aspiration, wills, needs, interests, activities, and objectives to participate in the development to achieve the objective of Republic of Indonesia based on Pancasila. Law 17/2013 specifies that social organizations shall be voluntary, social, independent, non-profit, and democratic in nature.

With regard to foreign social organizations, Government Regulation No. 59 of 2016 dated December 6, 2016 on Social Organizations Established by Foreign Nationals (“GR 59/2016”) clarifies that foreign social organizations shall consist of:

  1. A foreign foundation, or a similar form, headquartered in a country that has diplomatic relations with Indonesia. The foreign foundation may be (a) an International NGO to implement its activities with its own funding, or (b) an implementing agency to implement a certain program on behalf of a foreign donor or any development agency; and
  2. A foundation (yayasan) (i.e., the Foreign Foundation) established under Indonesian laws by any foreign party (an individual or an entity) with or without any Indonesian party (an individual or an entity).

Foreign social organizations noted above are required to obtain principal permits issued by the Ministry of Foreign Affairs and the operational permits. Based on the above, it appears that international social organizations referred to in Regulation 33/2020 are foreign social organizations under GR 59/2016.

Let us now discuss the definition of disaster and social sectors. Pursuant to Article 1 point 1 of Law No. 24 of 2007 dated April 26, 2007 on Management of Disasters, a disaster is defined as an event or a series of events that is threatening and disturbing the community life and livelihood, caused by natural and/or non-natural as well as human factor which results in human fatalities, environmental damage, loss of material possession, and psychological impact. On the other hand, we note that there is no specific definition on the word of “social” under the laws. In this regard, we refer to the definition of “social” provided by the official dictionary of the Ministry of Education and Culture which defines social as something related to the society. In practice, we understand that social sector involves any activities for the interest of human. Therefore, such definition may be interpreted in a broad manner.

  • Further Provisions on Exemption of Workplace Closure

Based on the above, foreign social organizations in DKI Jakarta Province may open their offices in Jakarta as they are eligible for the exemption of workplace closure under Regulation 33/2020. In continuing the operation of their offices, INGOs that are exempted from the workplace closure are subject to certain health protocols set out in Regulation 33/2020.

Further to the above, the Department of Manpower, Transmigration, and Energy (Dinas Tenaga Kerja, Transmigrasi, dan Energi or “Disnakertrans”) of DKI Jakarta Province recently issued Decree No. 837 of 2020 dated April 17, 2020 on Technical Guidelines for Implementation of Large-Scale Restriction (PSBB) on Working Activity in Workplace (“Decree 837/2020”). In general, Decree 837/2020 provides the measures regarding technical implementation of the PSBB on working activity and the reporting requirement for offices/workplaces that are exempted from the workplace closure.

Any violation of the above may subject the INGOs to sanctions under prevailing laws and regulations. Decree 837/2020 is effective for the period of implementation of the PSBB is effective in the DKI Jakarta Province.

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April 27, 2020

Copyright © 2020 AKSET. All rights reserved.


Precautionary Steps Taken to Maintain the Stability of Indonesian Financial Systems During COVID-19

The Novel Coronavirus Disease (“COVID-19”) pandemic has caused the country’s economic growth to slow down and the financial system to worsen. As an effort to maintain stability of the financial system and the national economy, the Government of Indonesia issued the Government Regulation in lieu of Law No. 1 of 2020 dated March 31, 2020 on the State Financial and the Financial System Stability Policies in Relation to the Handling of the Coronavirus Disease 2019 (COVID-19) Pandemic and/or to Overcome Threats that are Potentially Harmful to the National Economy and/or the Financial System Stability (“Perppu 1/2020”)

Perppu 1/2020 sets out policies which, among others, expand the authority of the relevant authorities in Indonesia that supervise and make policies to create the safety net for the financial and monetary conditions of the country, including, KSSK, BI, OJK, and LPS (all terms as defined below).

In this Newsflash, we focus on the financial system stability policy set out under Perppu 1/2020. Please visit our website for our Newsflash with regard to the tax policy set out under Perppu 1/2020 that we have discussed separately.

  • FINANCIAL SYSTEM STABILITY COMMITTEE’S LEGAL IMMUNITY

Initially, the Financial System Stability Committee (Komite Stabilitas Sistem Keuangan — “KSSK”) was formed under Law 9/2016 (defined below). KSSK consists of the Minister of Finance, the Governor of Bank Indonesia (“BI”), the Chairman of the Board of Commissioners of the Financial Services Authority (Otoritas Jasa Keuangan — “OJK”) and the Chairman of the Board of Commissioners of Indonesian Deposit Insurance Corporation (Lembaga Penjamin Simpanan — “LPS”), each of them represents their respective institutions to supervise, control and handle any Systemic Bank issues during both normal or financial crisis situations.

Under Perppu 1/2020, KSSK’s authority under Law No. 9 of 2016 on Prevention and Control of Financial System Crisis effective on April 15, 2016 (“Law 9/2016”) is expanded.  Under Perppu 1/2020, KSSK is now authorized to determine any scheme for incentives from the Government to tackle issues in financial institutions and issues with regard to the stability of the financial systems that threaten the national economy.

Article 27 of Perppu 1/2020 provides one interesting point. This provision grants legal immunity to KSSK’s members and its member institutions in performing the tasks prescribed in Perppu 1/2020 in good faith regardless of the amount of expenditure spent for the actions stipulated under Perppu 1/2020. In fact, under Perppu 1/2020 such expenditure will not be considered state’s loss. Therefore, no civil or criminal legal action may be conducted against KSSK’s decision. Any decision or action by KSSK will neither be considered an administrative court object of assessment. We note that this provision is being challenged at the Constitutional Court.

Perppu 1/2020 further grants each of KSSK’s member institutions various forms of authority intended to help maintain the stability of Indonesia’s financial system.

  • BI REGAINS SOME CRUCIAL AUTHORITIES

Perppu 1/2020 now grants BI several authorities that were previously revoked by Law 9/2016, as follows:

  • to provide a short term loan or funding to banks based on the sharia principles, both to Systemic or non-Systemic Banks based on BI and OJK’s assessment of banks’ soundness level and solvability — assessed by OJK, as well as banks’ collateral sufficiency and repayment ability — assessed by BI and OJK;
  • to provide a special emergency liquidity loan (pinjaman likuiditas khusus) to a Systemic Bank that does not meet the requirement for the foregoing short term loan and or funding with the approval from KSSK; and
  • to buy Government Bonds (Surat Utang Negara — “SUN”) and/or Government Sharia Bonds (Surat Berharga Syariah Negara SBSN”) from the primary market issued for particular purpose, specifically in relation to COVID-19 pandemic.

In addition to the foregoing, Perppu 1/2020  allows BI to do the following actions:

  • to purchase or repurchase (repo) of government securities owned by LPS to fund the cost of handling solvability issues for Systemic or non-Systemic Banks;
  • to regulate the obligation to receive and use foreign exchange for residents including provisions regarding the foreign exchange’s delivery, repatriation, and conversion in order to maintain macroeconomic and financial system stability; and
  • to provide funding to corporate or private sectors by repurchasing (repo) SUN or SBSN owned by corporate or private sector via banks.

Previously during the economic crisis in 2008, Bank Century’s bailout by BI cost the Government trillions of Rupiah. Learning from this, the Government had limited BI’s authority in giving incentives for banks. BI was only allowed to provide short term loans and or funding for Systemic Banks with a very high threshold. In addition to receiving such funding from BI, Systemic Banks must also provide high-quality collateral in the form of high-rating securities that are liquid or loan assets rated as Current. Further, BI used to only be allowed to purchase or conduct repo transactions of Bovernment bonds owned by LPS. Also, buying SUNs and SBSNs from the primary market was prohibited.

  • MORE POWER GRANTED TO OJK

Perppu 1/2020 provides a more significant role to OJK. On top of holding the crucial role in deciding to provide short term loans or funding for banks, OJK is allowed to give written orders to financial institutions to perform mergers, consolidations, acquisitions, integrations, and/or conversions.

In respect of the capital markets, OJK is authorized to determine exemptions for certain parties from performing the disclosure obligation as a part of the effort in preventing and handling the financial crisis. Further, OJK may enact regulations concerning the use of information technology for holding General Meetings of Shareholders or other meetings that are mandatory for financial service business actors. This policy is also in line with policies issued by OJK on similar issues under OJK Circular Letter No. S-92/D.04/2020 dated March 18, 2020 on the Relaxation on the Reporting Obligations and the Implementation of General Meetings of Shareholders.

  • LPS’ EXTENSION OF AUTHORITY

Perppu 1/2020 also expands LPS’ authority during the COVID-19 pandemic by allowing LPS to:

  • undertake joint preparation by conducting exchange information and/or conduct joint inspection with OJK against banks that are suspected to have solvability issues;
  • take the following actions:
    1. perform sell or conduct repo of Government bonds to BI,
    2. issue bonds,
    3. receive loans from another party, and/or
    4. receive loans from the Government,

in case LPS is considered to have liquidity issues in handling failing banks;

  • decide to save or not to save failing banks that are non-Systemic by considering, among others, the economic condition, availability or appetite of investors, banks’ complexity of issues and the efficacy in handling those issues, including but not limited to the consideration on the least cost test; and
  • regulate and implement deposit insurance policies for a group of customers based on the source of fund and/or implement such policy with regard to a particular savings portfolio with a predetermined insured amount, that will be regulated in a Government Regulation.

 

***

Perppu 1/2020 is valid as of March 31, 2020. However, in accordance with the Constitution and applicable laws, the House of Representatives (Dewan Perwakilan Rakyat or “DPR”) will decide on its next hearing whether to approve Perppu 1/2020 into a law. If the DPR decides to cancel Perppu 1/2020, then Perppu 1/2020 will immediately be cancelled.

 

April 24, 2020

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Recent Land Related Services due to the COVID-19 Outbreak

To implement series of instructions issued by the Government of the Republic of Indonesia as well as to prevent the spread of the Covid-19 in Indonesia, Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency (the “Minister”) issued Circular Letter No. 3/SE-100.TU.03/III/2020 dated March 20, 2020 on Land Services for the Prevention of the Spread of Corona Virus Disease 2019 (Covid-19) (“Circular Letter”). The Circular Letter was also issued to ensure and maintain the continuity of various land related services provided by the Land Offices (Kantor Pertanahan) in Indonesia during the Covid-19 outbreak. Such land related service procedures should be implemented by taking into account the actual condition of the relevant Land Office as well as policies implemented by the local government.

  • Type of Land Related Services

During the Covid-19 outbreak, Land Offices will be providing the following land related services under certain conditions:

  1. Mortgage (i.e., registration, transfer, deletion (roya), change of name and/or data correction), Land Value Zone (Zona Nilai Tanah), certificate checking and/or Statement Letter of Land Registration (Surat Keterangan Pendaftaran Tanah, SKPT) services, shall be conducted electronically, which is basically in line with the provisions under (i) Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency Regulation No. 5 of 2017 dated April 25, 2017 on Electronically Land Information Services and (ii) Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency Regulation No. 9 of 2019 dated June 21, 2019 on Electronically Integrated Mortgage Services.
  2. Any other land related services (e.g., registration of data maintenance services and any other land information) will be conducted through Online Service Counter Application (Aplikasi Layanan Loket Online). The submission of the required documents will observe the schedule determines by the relevant Land Office.
  3. Any particular and urgent land related applications that are not yet available to be submitted through the Electronic Service and/or Online Service Counter Application, may be submitted physically to the relevant Land Office by observing the safety procedures.
  4. Any land related services which requires ground attendance and physical interaction will be ceased or limited depending on the actual situation on the ground.
  5. Any land activities (e.g., counseling, socialization, etc.) that involves society gathering will be ceased or limited depending on the actual situation on the ground.
  • Effective Date

The Circular Letter was initially valid until April 5, 2020 and may be extended. As a further implementation, the Minister further issued Letter No. TU.03/554-100/III/2020 dated March 27, 2020 confirming that the Circular Letter is still valid.

  • Implementation of the Land Related Services

Although the Minister through the Circular Letter has applying these procedures to the Land Offices (e.g., several land related services may be processed through an electronic system, physical application to Land Offices is still possible), it is important to note that there might be several Land Offices that are yet to implement these procedures. For instance, we understand that there are several Land Offices that are completely closed due to Covid-19 outbreak or do not have a fully integrated electronic system to support the relevant online land related services.

In order to avoid any interruption on the relevant land related service applications, it is recommended to coordinate with the Land Deed Official (Pejabat Pembuat Akta Tanah, PPAT) to ensure that the relevant land related services application is feasible to be conducted to the relevant Land Office during this Covid-19 outbreak.

***

April 23, 2020

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Handling COVID-19 Outbreak in Construction Services Sector

On March 27, 2020, the Minister of Public Works and Housing (“MOPWH”) issued the MOPWH Instruction No. 02/IN/M/2020 on Protocol of Prevention of the Corona Virus Disease 2019 (COVID-19) Outbreak in Construction Service Works (the “MOPWH Instruction”). This MOPWH Instruction serves as a follow up to President Joko Widodo's direction on March 15, 2020 related to the mitigation efforts and determination of COVID-19 as an Extraordinary Event (Kejadian Luar Biasa or “KLB”) by the Minister of Health.

The MOPWH Instruction mainly revolves around the question on the continuity of construction work. The MOPWH Instruction stipulates that construction works may be suspended due to force majeure only if:

    • it is considered high-risk due to its location being near the epicenter of the outbreak,
    • there has been a confirmed case of COVID-19 and/or a worker having the status as patient under surveillance (Pasien Dalam Pengawasan or “PDP”) for COVID-19, or
    • there has been a regulation from the local or central government suspending the construction work due to force majeure.

However, if construction work is deemed crucial to continue due to its nature and urgency in handling social and economic impacts from COVID-19, such work may continue if:

    • it obtains an approval from the MOPWH,
    • it implements the protocol of COVID-19 prevention with high discipline and submits a periodical report to the COVID-19 Prevention Task Force, and
    • it must suspend its operation if a worker is found to be infected with COVID-19 or become a PDP.

Further, the MOPWH Instruction stipulates key policies as follows:

  • The Scheme for Protocol on Prevention of COVID-19 in Construction Service Works

Based on the MOPWH Instruction, the following points are the protocol scheme that must be conducted during construction work:

    • the establishment of a COVID-19 Prevention Task Force;
    • the identification of potential risks of COVID-19 in the field;
    • the provision of health facilities in the field; and
    • the implementation of COVID-19 prevention in the field. For ease of reference, below is the protocol mechanism on prevention of COVID-19 outbreak for construction services:

 

  • The Actions to Take for Suspended Contracts

The MOPWH Instruction provides that in the event a construction contract is suspended due to force majeure, the following conditions shall apply:

  1. Establishing the mechanism for work suspension;
  2. Establishing the mechanism for changes in contract specifications; and
  3. Compensation in the form of fulfilling (i) the payroll of the construction workers during the suspension period, and (ii) the payment obligation to sub-contractor, producer, and supplier during the suspension period. This requirement is in line with the Minister of Manpower Circular Letter No. M/3/HK.04/III/2020 dated March 17, 2020 on the Employee Protection and Business Sustainability on the Prevention of COVID-19 (the “Circular Letter”) which emphasizes that workers/employees are still entitled to receive their payroll during the COVID-19 outbreak situation.

The MOPWH Instruction further provides that if a construction contract needs to continue due the work’s nature and urgency, the implementation of COVID-19 prevention in the field can be proposed as part of an additional cost for the implementation of Construction Safety Management System (Sistem Manajemen Keselamatan Konstruksi or “SMKK”) through an addendum of the construction contract.

  • The Protocol on Prevention of COVID-19 for Goods/Services Procurement in Construction Services

For goods/services procurement in construction services, the MOPWH Instruction further provides for ease and expansion access through both online and offline procurement process. This provision is intended to minimize the risk of spreading the virus by taking into account requirements on goods/services procurement in the construction services sector.

We note that while the MOPWH Instruction is indeed issued during the COVID-19 outbreak in Indonesia, this instruction also enables the implementation of construction services to run more effectively and efficiently even after the pandemic period has passed. Overall, this MOPWH Instruction addresses the concern on performing construction work during COVID-19 outbreak so that this issue will not interfere with the infrastructure development in Indonesia.

***

April 23, 2020

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KPPU: Law Enforcement Through Electronic Means

On April 6, 2020, the Indonesia Business Competition Supervisory Commission (Komisi Pengawasan Persaingan Usaha or “KPPU”) issued the (i) KPPU Regulation No. 1 of 2020 dated April 6, 2020 on Case Handling Electronically (“KPPU Reg. 1/2020”); and (ii) KPPU Decree No. 12/KPPU/Kep.1/IV/2020 dated April 6, 2020 on Case Handling in the event of an Emergency Disaster due to the COVID-19 Outbreak in Indonesia (“KPPU Decree 12/2020”). These two policies are issued by KPPU in relation to the Large-scale Social Restrictions (Pembatasan Sosial Berskala Besar or “PSBB Policy”) ordered by the Indonesian Government due to the COVID-19 outbreak in Indonesia.

These two policies aim to address concern over limitations for KPPU in conducting supervision and law enforcement duties due to  the issuance of  the PSBB Policy. Pursuant to KPPU Reg. 1/2020 and KPPU Decree 12/2020,  KPPU has the ability to implement supervision and law enforcement through Electronic Media. KPPU Reg. 1/2020 defines Electronic Media as all electronic interaction facilities used by KPPU, not limited to the visual teleconference and electronic mail (e-mail).

We also note that while KPPU Reg. 1/2020 is indeed issued during the COVID-19 outbreak in Indonesia, this regulation enables KPPU to further conduct its law enforcement effort through electronic means outside the context of this pandemic, which allows more efficiency in the competition law sector.

Important issue contained in KPPU Decree 12/2020 is as follows:

  • Recommencement of Law Enforcement Activities by KPPU while Prioritizing the Use of Electronic Media

The KPPU Decree 12/2020 revokes two previous decrees: KPPU Decree 10/2020 and KPPU Decree 11/2020, which were issued to suspend the law enforcement activities by KPPU from March 17 to April 6, 2020. The revocation of these two Decrees recommences all previously suspended law proceeding at KPPU upon the issuance of KPPU Decree 12/2020 on April 6, 2020.

In conjunction with the recommencement of law enforcement activities, KPPU Decree 12/2020 further mandates for law enforcement activities to prioritize the use of electronic media. While the use of electronic means is in line with the PSBB Policy for physical distancing, because the mandate under this KPPU Decree 12/2020 is only to prioritize but not migrate all law enforcement activities to electronic media, KPPU may still be able to conduct face-to-face legal proceedings.

Meanwhile, key policies contained in KPPU Reg. 1/2020 are as follows:

  • Notification Assessment and Partnership Supervision

Through KPPU Reg. 1/2020, all written notification to be submitted to KPPU may be conducted by way of Electronic Media. These notifications consist of written consultation notification, assessment, KPPU opinion, notice stipulation, as well as partnership supervision. All rules concerning these written notifications will still refer to the KPPU regulations on assessment for post-acquisition/merger notification obligation as well as regulations on partnership supervision currently in force.

  • Implementation of Legal Proceedings for Anti-Trust Matters through Electronic Media

KPPU Reg. 1/2020 further provides mechanisms to conduct legal proceedings for examination of late submission for mergers and acquisition notification requirement, examination of alleged violation of partnership agreements, and other anti-trust cases through Electronic Media. In conducting these legal proceedings, KPPU introduces Electronic Domicile, where KPPU regards an e-mail address as official domicile for parties involved in legal proceedings with KPPU. This determination of Electronic Domicile allows KPPU to send hearing summons and conduct other hearing correspondences to and using this Electronic Domicile. Further, hearings will be conducted through the Electronic Media.

Although KPPU Reg. 1/2020 does not specify the Electronic Domicile of KPPU in conducting examination of late submission for M&A notification requirement, examination for alleged violation of partnership agreement, as well as other anti-trust cases, KPPU website does provide guidance that submission of report for alleged violations to be submitted through ‘pengaduan@kppu.go.id’, while clarification and consultation to be submitted through ‘infokom@kppu.go.id’.

KPPU Reg. 1/2020 also provides that the panel of judges in a legal proceeding may render its decision through Electronic Media, and that any decision rendered using this method is legally deemed to have been read in a public hearing that is attended by the parties. After announcement of KPPU decision for a particular proceeding, KPPU may publish the copy of its decision and conduct enforcement of such decision through Electronic Media as well.

  • Issues

The KPPU Reg. 1/2020 is a highly appreciated initiative from KPPU to allow a more efficient conduct of its authorities and the process of its law enforcement activities especially during this pandemic situation. However, as in many other new systems being developed, there will be questions from both practical and theoretical aspects in performing legal proceedings through electronic means. One of them, for example, is the procedure for cross-examinations during the proceedings. For this reason, it will be crucial for KPPU at this stage to provide further guidance on the procedures as well as good communication to ease the legal enforcement process using the Electronic Media, so that the intention of the KPPU Reg. 1/2020 can be well delivered.

 

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April 15, 2020

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Bank Indonesia Provides an Incentive for Banks During COVID-19 Outbreak

In order to mitigate the uncertain economic situation due to the COVID-19 outbreak in Indonesia, Bank Indonesia (“BI”) issued a new Regulation No. 22/4/PBI/2020 dated March 26, 2020 on the Incentives for Banks Granting Provision of Funds For Specific Economic Activities to Support the Handling of Economic Impacts due to Corona Virus Outbreak (“BI Reg. 22/2020”).

Through BI Reg. 22/2020, BI provides an incentive (as described below) for conventional banks, sharia banks and sharia business units (altogether “Banks”) carrying out certain funding activities.

  • Type of Funding Activities

Banks will be entitled to receive an incentive as stipulated under BI Reg. 22/2020 if it carries out the following funding activities:

  1. Export activities (e.g., export credit or financing);
  2. Import Activities (e.g., productive import credit or financing);
  3. L/C;
  4. Micro, small and medium business activities (e.g., micro, small and medium credit or financing); and/or
  5. Other prioritized economic activities as stipulated by BI.
  • Type of Incentive

BI will grant the incentive in the form of a relaxation on the fulfillment obligation of daily Minimum Statutory Reserves (Giro Wajib Minimum) in Rupiah and foreign currency that must be fulfilled by Banks (the “Incentive”). The Incentive will be granted to Banks on a monthly basis and will commence on April 16, 2020. The granting of the Incentive will be valid until December 31, 2020.

  • Procedure of the Incentive Granting

For BI to determine the eligibility of Banks in receiving the Incentive, Banks need to provide the relevant data with respect to the above funding activities to BI on a monthly basis. The relevant data may be sourced from:

  1. Conventional banks’ monthly report;
  2. Monetary and financial system monthly stability report of sharia banks and sharia business units;
  3. Conventional banks’ integrated report; and/or
  4. Other reports or data as stipulated by BI.

BI will use the reported data as a basis in granting the Incentive to Banks. BI may also liaise with the government and/or the Financial Services Authority (Otoritas Jasa Keuangan, OJK) in granting the Incentive to the Banks.

More detailed provisions on BI Reg. 22/2020 will be further regulated in a Regulation of Members of Board of Governors.

 

***

April 14, 2020

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DKI Jakarta Implements PSBB Measures to Minimize Further Spread of COVID-19 Outbreak

On April 9, 2020, the Governor of DKI Jakarta issued Regulation No. 33 of 2020 (the “Regulation”) and Decree No. 380 of 2020 (the “Decree”), both regarding the Implementation of Large-Scale Social Restrictions in Handling Coronavirus Disease (Covid-19) in DKI Jakarta.

The Regulation and the Decree are the follow-up to the approval issued by the Minister of Health who approves the implementation of the Large-Scale Social Restrictions (Pembatasan Sosial Berskala Besar – “PSBB”) in DKI Jakarta in order to minimize further the spread of the Covid-19 outbreak.

Based on the Decree, the PSBB measures are effective as of April 10, 2020 until April 23, 2020 and may be further extended if necessary.

We set out below the key provisions of the PSBB based on the Regulation.

  • General Restrictions

During the implementation of the PSBB, everyone must implement a Clean and Healthy Behavior (Perilaku Hidup Bersih dan Sehat) and use a mask outside his or her house. In addition, the Regulation limits outdoor activities during the PSBB as follows:

  1. schools and/or educational institutions activities will be temporary suspended and replaced by learning activities through long distance learning methods;
  2. workplaces closure which means that activities at workplaces are temporarily suspended, and employers must implement the work-from-home system;
  3. religious activities in houses of worship are temporarily suspended;
  4. public places or facilities shall temporarily be closed;
  5. social and cultural activities that draw crowds are temporarily suspended; and
  6. use of modes of transportation of people and goods will be limited.
  • Workplaces Closure

As part of the implementation of the PSBB, all “non-essential” businesses are required to temporarily suspend their activities at the workplaces. The Regulation stipulates certain categories that constitute “essential” businesses which are exempted from the workplaces closure, as follows:

  1. all offices/government institutions, either central or regional;
  2. foreign country representative offices and/or international organizations carrying out diplomatic functions;
  3. state/regional-owned enterprises participating in the handling of Covid-19 and/or fulfillment of basic needs;
  4. workplaces in the following sectors:
    • health;
    • food/beverage;
    • energy;
    • communication and information technology;
    • finance;
    • logistics;
    • hospitality/hotel activities;
    • construction;
    • strategic industries;
    • basic services, public utilities and industries which are deemed certain vital national objects; and/or
    • daily needs.
  5. local and international non-governmental organizations engaging in the disaster and/or social sectors.

However, the businesses that are exempted above shall comply with the obligation to conduct the health protocols set out in the Regulation.

  • Limitation on the use of Modes of Transportation

During the implementation of the PSBB, all movement of people and/or goods are limited to the fulfillment of basic needs and activities that are permitted during the implementation of the PSBB. For ease of reference, below is the relevant limitations:

  • Criminal Sanctions

Under Law No. 6 of 2018 dated August 8, 2018 on Health Quarantines, any violation of the PSBB which causes a public health emergency may be subject to an imprisonment of up to 1 (one) year and/or a monetary fine of up to Rp100,000,000 (one hundred million Rupiah).

 

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April 13, 2020

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