27 July 2007

hukumonline.com

The hukumonline.com experience is a unique and fascinating view into the mind of successful individuals giving back to the community that has provided for them over their professional and personal journeys.

The hukumonline.com journey started with a desire to build a repository of Indonesian laws and regulations that were easily accessible at a central location. Considering, this is the age of technology it made sense to make this central and easily accessible repository one that was available online. Thus was born the www.hukumonline.com concept. Seven years into the future this concept has evolved and grown into Indonesia's premier legal news, information, and legislation database.

This past 14 July 2007 was hukumonline.com's 7th birthday and the celebrations are set to culminate with a re-launching of new products and new ventures, in essence a re-visioning of that original dream into the realities of 2007. This will see the launch of an English language version of the hukumonline.com site and a vast range of new interactive and collaborative ventures that will allow hukumonline.com's more than 70,000 registered users and subscribers to add their very own content to the hukumonline.com site, a sort of hukumpedia if you prefer.

The successes over the years have been mounting and within legal professional, government, and business circles where there is a need for real time legal news and analysis hukumonline.com has already become synonymous with accurate and telling analysis of issues that effect the way law is practiced in Indonesia. It is the goal of hukumonline.com to build and expand on this success to continue to influence the way law is practiced in Indonesia and to continually provide a forum for a greater understanding of Indonesian law, not only for Indonesians but for anyone with an interest in the law.

So, Happy 7th Birthday hukumonline.com, may it be the first in a long line of many more to follow.

24 July 2007

Corporate Social Responsibility - An Updated Analysis

The recent enactment of the Company Law Bill has brought to an end a long and tortuous history of getting an updated and more relevant Company Law into the legislation field of play. The Bill itself has been on the National Legislation Program (Program Legislasi Nasional / Prolegnas) since 2005 and was originally submitted to the House of Representatives (Dewan Perwakilan Rakyat / DPR) in October 2005. The almost 2 years it has taken to pass the DPR may surprise some but if one is to consider the Inventory List of Problems (Daftar Inventarisasi Masalah / DIM) on this Bill extended to some 813 problems, then it is not at all surprising that it has taken this long to plough through the list in order to secure passage of the Bill.

The Bill has not been without an element of controversy and this is particularly so with the insertion of Corporate Social Responsibility (CSR) provisions (Chapter V, Article 74). What is interesting about this particular provision is that it applies only to companies that are involved in the exploitation of Indonesia's natural resources. However, this is not entirely true as the Elucidation to the Article implies that the provision applies to any company that undertakes business activities that may impact on the environment. Therefore, it is a bit of a misnomer to state that the Article refers only to CSR as it in fact also includes an element of environmental responsibility. And it is this grouping of CSR and environmental responsibility into one Article that gives rise to the confusion.

In essence there is a clear distinction between CSR and any corporate liability that may arise as a result of environmental damage. The intent of the CSR provisions is not to regulate corporate liability with regard to the environment as this is already regulated elsewhere.

Nevertheless, the apparent focus on just the natural resources sector is clearly going to create a double standard as it is not only companies in the natural resources sector that run the risk of doing damage to the environment or being the source of other accidents or mishaps that might fall within the gambit of CSR which the Bill seems so eager to promote and mandate. However, if CSR is really not about liability and is about community development then it would make sense for the provision to be all encompassing rather than restrictive like it currently is. For example, a hospital which is producing dangerous waste that has the potential to harm the environment and therefore is within the purported scope of the Bill at least in terms of the environmental elements of Article 74.


In terms of any CSR obligation the mere fact that the hospital is located where it is located ensures that local residents have access to health services, perhaps employment, and other benefits that did not previously exist. This would lead to an argument from the hospital owners that they have in fact already fulfilled their CSR requirements without making any additional contribution to a CSR fund.

In terms of legal drafting it may have been better to regulate CSR and corporate environmental responsibilities in different and distinct Articles in order to remove any possible confusion. Nevertheless, the fact that the provisions are not all encompassing means that they remain somewhat discriminatory even though it seems that the only companies likely to be able to avoid CSR contributions are in the financial services sector.


The provision only requires that the companies allocate a part of their income to a CSR fund. However, the language of the Bill does not suggest that this is a rainy day fund to cover any costs associated with any future accident or mishap that damages the environment but rather it is a fund that is to be spent on activities or development that gives back to the communities where the businesses are located. The purpose of the CSR fund is directed much more towards community development than it is to a less-productive rainy day fund. Another concern is that the CSR fund may be subject to abuse by poiticians and other interests looking to get cash to fund their activities under the guise of companies fulfilling their CSR obligations. This sort of abuse of discretionary funds is not unheard of in Indonesia.

There is little doubt that companies must be responsible for their actions and that they must be able to cover the costs of any damage that they may do to the environment. However, where a company does harm this has traditionally been rectified through the court system with compensation awards where negligence has been proven.


Yet, as the Lapindo case highlights the Government is seeking to avoid court based litigation in favor of regulating responsibility in other legislation instruments such as Presidential Regulations. In the Lapindo case a Presidential Regulation was used to determine guilt and the amount of compensation payable, including the mechanism for paying. It has been argued that this is the Government’s way of enforcing CSR where a company tries to avoid or renege on any responsibility for negligence.

The real question is whether or not there is any distinction between the CSR obligation and the setting aside of funds for community development. If the CSR is to become a fund set aside to cover future costs of yet to occur accidents or mishaps then this will have a significant impact on the bottom line of businesses as at least some of their income is not being returned to the fold for development or expansion of the business. In contrast if the fund is designed to be a source of expenditure on community development then this is much more likely to have longer lasting positive impacts on the community.

There have been suggestions that the Bill once it becomes Law will be subject to a judicial review application at the Constitutional Court. However, it remains to be seen what provisions of the 1945 Constitution that the concept of CSR breaches. Because it only applies to certain companies there might be a sustainable argument for discrimination.

It would be interesting to see whether the Constitutional Court would adopt a strict legal interpretation which would appear to suggest that there is an element of discrimination or would the court give greater emphasis to the intent of the provision to protect and provide for the rights of the wider community where they might suffer harm at the hands of a negligent company or to ensure that companies put back into the communities from which they so willingly and eagerly take.


What is certain is that the debate of CSR is far from over as there is still subsidiary legislation in the form of Government Regulations to be issued to facilitate the implementation of the CSR provisions.

Finally, the regulation of CSR is likely to have an unintended impact on businesses; the reduction of innovation and creativity in CSR. Once CSR is regulated then businesses will only have sufficient incentive to do the bare minimum as required by the law. An interesting argument against CSR is that companies already fulfill a significant CSR role through the provision of employment, goods and services, and the creation of local wealth. Furthermore, it is argued by the opponents of CSR that the emphasis on CSR runs counter to the idea of free enterprise. Yet, in spite of these concerns CSR has been generally accepted as being good for business because whatever is good for the community is ultimately going to be good for business.

23 July 2007

Mass Terminations - Companies Beware

Mass terminations of employees is not a new phenomenon in Indonesia despite there being laws and regulations in place to reduce this practice or at least ensure that all efforts are undertaken to ensure that a mass termination only occurs where it is absolutely the last option and resort for the company. PT. Panin Lestari Internusa learned this the hard way at the Industrial Relations Court. The company owns and manages the Sogo franchise and when it closed the department store component of the Plaza Indonesia location it terminated 51 employees.

The Court held that this breached Article 151(1) of the Labor Law and the provisions of a Circular on the prevention of mass terminations. The Circular lists 8 things a company can do before choosing the termination option. The 8 things include reducing the wages and facilities enjoyed by senior staff, reduce shifts, stop or limit overtime, reduce work hours, and voluntary retrenchment, among others.

The crux of this case rests on the fact that the employer had sufficient time to explore other options to avoid a mass termination but chose not to.

The lesson to be learned here is that the responsibility and burden is on the employer to do everything they possibly can to avoid a mass termination. However, the courts will not punish employers who make that effort but they will find against those who do not. In this case the company has been ordered to pay the salaries of the 51 employees from the date of their termination through to the date of the decision.

Corporate Social Responsibility

The recent enactment of the Company Law Bill has brought to an end a long and tortuous history of getting an updated and more relevant Company Law into play. The Bill itself has been on the National Legislation Program since 2005 and was originally submitted to the House of Representatives (DPR) in October 2005. The almost 2 years it has taken to pass the DPR may surprise some but if one is to consider the Inventory List of Problems on this Bill extended to some 813 problems then it is not at all surprising that it has taken this long to plough through the list.

The Bill has not been without an element of controversy and this is particularly so with the insertion of Corporate Social Responsibility (CSR) provisions (Chapter V, Article 74). What is interesting about this particular provision is that it applies only to companies that are involved in the exploitation of Indonesia's natural resources. This is clearly going to create a double standard as it is not only companies in the natural resources sector that run the risk of doing damage to the environment or being the source of other accidents or mishaps that might fall within the gambit of CSR which the Bill seems so eager to promote and mandate.

The provision only requires that the companies allocate a part of their income to a CSR fund. There is little doubt that companies must be responsible for their actions and that they must be able to cover the costs of any damage that they may do to the environment. However, where a company does harm this has traditionally been rectified through the court system with compensation awards where negligence has been proven. Yet, as the Lapindo case highlights the Government is seeking to avoid court based litigation in favor of regulating responsibility in other legislation instruments such as Presidential Regulations. In the Lapindo case a Presidential Regulation was used to determine guilt and the amount of compensation payable, including the mechanism for paying.

The real question is whether or not there is any distinction between the CSR obligation and the setting aside of funds for community development. If the CSR is to be a fund set aside to cover future costs of yet to occur accidents or mishaps then this will have a significant impact on the bottom line of businesses as at least some of their income is not being returned to the fold for development or expansion of the business. Even where the money is placed in a savings or term deposit or some other account it is earning interest but it is not going to be making any contribution to the development of the core business activities of the relevant company.

There have been suggestions that the Bill once it becomes Law will be subject to a judicial review application at the Constitutional Court. However, it remains to be seen what provisions of the 1945 Constitution that the concept of CSR breaches. Because it only applies to certain companies there might be a sustainable argument for discrimination. It would be interesting to see whether the Constitutional Court would adopt a strict legal interpretation which would appear to suggest that there is an element of discrimination or would the court give greater emphasis to the intent of the provision to protect and provide for the rights of the wider community where they might suffer harm at the hands of a negligent company.

However, what is clear from the Bill is that the CSR provisions are not intended to create a rainy day fund to cover future accidents, mishaps, or negligence, but rather the purpose of the funds are to provide for community development initiatives that promote and support the surrounding communities close to the relevant business. There is little doubt that the CSR fund is to be a source of community development capital.

What is certain is that the debate of CSR is far from over as there is still subsidiary legislation in the form of Government Regulations to be issued to facilitate the implementation of the CSR provisions.

21 July 2007

Some Sage Advice...

Some sage advice taken from "The wisest wisdom of Guru Bob"...



Warning...maybe not to everyone's taste or sense of humor...



"You can't always get what you want - but you can get what you need. Then you can swap it for what you want."



"If you step on people on your way to the top, you can step on them again on your way back down."



"Before you criticise someone, walk a mile in their shoes. That way, when you criticise them, you're a mile away and you've got their shoes."



"Never argue with a fool. They drag you down to their level and then beat you with experience."



"If you lend a helping hand to a friend in need, they'll remember you again the next time they're in need."



"There's more than one way to skin a cat - if you've got enough cats to practice on."



"The fact that no one understands you doesn't mean you're brilliant."



"If at first you don't succeed, try doing it the way your wife first suggested."



"May I be granted he serenity to accept what I cannot change, the courage to change what I can - and the ability to crush anyone who tries to get in my way."



Pope Gavin III, from the fifth century, had a saying:

"Quod latinum dictum, altum audit - 'whatever is said in Latin sounds profound'."



"Things may come to those who wait - but only what's left over by those who didn't wait."



There is always more but for now this will do...Happy reading :)

Legal Education in Indonesia

The first blog entry of substance represents something that I am passionate about but should not be construed as a common theme for all other blog entries to be made in the future...it is just that you have to start somewhere and with something! I am not a procrastinator but rather a decision maker so the topic is legal education in Indonesia.

There has been some interesting interplay in the Jakarta Post of late about the state of reform of the Indonesian legal education sector or more aptly the lack of serious reform. Yet, all contributors to date, with their own personal agendas or preferences aside, miss some critical big picture perspectives that will ultimately determine the success or otherwise of reform in this field.

The easy part is to identify the shortcomings or failings generally or specifically, such as the lack of a self-sustaining academic environment that encourages the pursuit of academic excellence and innovation by academic staff and students through to the academic staff that 'moonlight' either with teaching at other institutions or consulting in both the public and private sectors.

Yet, what is lacking is a comprehensive, integrated, and coordinated plan of attack. Reform of the legal education sector and the production of highly-skilled and qualified law graduates do not address the other core issues of reform, specifically of the legal institutions where these young and impressionable graduates are going to go. It is one thing to teach morals and legal ethics it is a completely different matter to then place these fresh graduates into an institutional setting which is in many cases irrevocably broken.

The problem is much greater than eradicating court mafia or the ability to purchase justice as is the philosophy that 'fixing' legal education will lead to an automatic eradication of all things bad in the courts, the Department of Law and Human Rights, the Offices of the Attorney General and the Public Prosecutor, and the legal profession overall. This is at best naive and at worst an under-estimation of the extent and scope of the problem.

In spite of the gloom and doom expressed by some, there are others who see hope...the reality is that law reform generally and reform of the legal education sector more explicitly is a work in progress where reforms will take time. The journey for some will always be too slow but there are great satisfactions to be had in small steps. For instance, many claim that the state of legal education is so bad that Indonesia will forever fail to compete in the international legal field. The often citing of the Litigan and Sipadan islands case where Indonesia lost a claim to Malaysia over the sovereignty of those islands.

Yet, when one looks at the success of Indonesian law schools, and particularly the Law Faculty of the University of Indonesia, in international law competitions this argument would seem to lose much of its sustainability. Indonesia has the current 'best oralist' in the world title from the Philip C. Jessup International Law Moot Competition, is the current champion of the Asia Cup competition, and also the current champion of the International Maritime Law Moot Arbitration competition. This in and of itself implies that the state of legal education in Indonesia is improving and that Indonesian law students are more than capable of competing and winning on the world stage; an achievement to be proud of...

Yes, reform is important across all sectors of Indonesian society. Reform of the legal education sector is also important but this is even more so the case as part of a comprehensive, integrated, and coordinated policy and plan for implementation. Only time will tell how successful Indonesian law schools will be in reforming themselves and their institutions but it is fair to say that the process has begun and there are already some excellent successes to date.

Okey Dokey...

Well...I thought it was as good a time as any to take the plunge into the world of blogging and now I am here and ready to go!

The beauty of blogging and the attraction to it as a forum of communication is only that it will let me post my musings on all things as much to humor myself as it is to humor others.

The first musing is something I found in a recent gift...

"You can't always get what you want - but you can get what you need. Then you can swap it for what you want."

I hope you enjoy these musings