Criminal Liability for Corporations under Indonesia’s New Criminal Code

Indonesia recently unveiled its new Criminal Code (Kitab Undang-Undang Hukum Pidana or “KUHP”). This article looks specifically at how the new KUHP affects corporations in Indonesia and key provisions of which companies should be aware.

Corporate Criminal Liability

The new KUHP introduces a set of provisions on corporate criminal liability which were previously provided under Supreme Court Regulation No. 13 of 2016 regarding Guidelines on Case Management for Crimes Committed by Corporations (“MA Reg 13/2016”).

Under Article 45 of the new KUHP, corporations are subject to penalties for criminal offences. Corporations include legal entities in the form of limited liability companies, foundations, cooperatives, state- or regionally-owned enterprises, or an equivalent, as well as associations, whether a legal entity or non-legal entity, business entities in the form of firms, limited partnerships, or an equivalent, in accordance with the prevailing laws and regulations.

Pursuant to Articles 46 and 47 of the KUHP, a criminal offence by a corporation will be deemed as such if committed by:

1. An executive who holds a functional position in the organizational structure of the corporation;

1. An individual who, pursuant to an employment relationship or other relationship, acts for and on behalf of the corporation or in the interest of the corporation; or

1. A party with the authority to give orders, a controller, or a beneficial owner outside the organizational structure of the corporation but able to control the corporation.

According to Article 48 of the KUHP, corporations may be held accountable for a criminal act if one of the following conditions is satisfied:

1. The criminal act falls under the scope of the business or activities of the corporation, as set out in the relevant articles of association or other applicable provisions;

1. The act unlawfully benefits the corporation;
2. The act was accepted as corporation policy;

1. The corporation failed to take measures aimed at preventing or minimizing the criminal act or ensuring compliance with the relevant regulations to prevent the occurrence of the relevant crime; and/or

1. The corporation deliberately allowed the criminal act to occur.

If one of the above conditions is satisfied, Article 49 of the KUHP stipulates that liability for the criminal act shall fall on the corporation, managers holding functional positions in the corporation, the parties who give orders, controllers, and/or beneficial owners of the corporation.

While Chapter XXXV of the new KUHP provides bridging articles between the new KUHP and other laws regarding special crimes, i.e., serious human rights violations, terrorism, corruption, money laundering, and drug trafficking, it does not specifically regulate corporate criminal liability for these crimes. Corporate criminal liability for these crimes would refer to the above provisions of the new KUHP, except for sanctions, which would refer to existing regulations. This also applies to other crimes not specifically regulated under the new KUHP, such as crimes against the environment.

Vicarious Liability

Article 37 point (b) of the new KUHP allows vicarious liability to be imposed on a person based on the actions of another person. The elucidation of the article says that every person is responsible for actions performed by another person on their behalf or within the limits of their orders. For example, the head of a company might be held responsible for the actions of her subordinates.

This provision on corporate criminal liability is not applicable for actions that are specifically regulated in other laws and regulations, such as Law No. 32 of 2009 regarding Environmental Protection and Management, dated October 3, 2009, as amended by Law No. 11 of 2020 regarding Job Creation (“Law 32/2009”). Under Article 116 paragraph (2)(b) of Law 32/2009, if an environmental crime is committed by, for, or on behalf of a business entity, criminal prosecution and criminal sanctions shall be imposed only on the person who gave the order to commit the crime or the person who acted as the leader of the criminal activity.

Notwithstanding the specific provision that excludes vicarious liability in the context of environmental law, there have been previous instances where a person was imprisoned for a wrongdoing committed by another person. One such case was KS v. the Republic of Indonesia No. 186/Pid.Sus/2015/PTPBR, which was heard at the High Court of Pekanbaru, in Riau province. In that case, KS (the “Defendant”) received a prison sentence of two years for causing environmental damage through forest fires. The Defendant was found guilty even though the responsibility for the daily operation of the plantation where the fires occurred fell on the estate manager. The Defendant did not have the authority to lead the daily operation of the plantation or give orders, but only assisted and received orders from the estate manager.

As such, with the enactment of the KUHP, it is possible to extend the application of vicarious liability in the context of corporate criminal liability to more specific crimes outside the KUHP itself, such as those relating to the environment.

Criminal Sanctions and Other Penalties for Corporations

The new KUHP divides the criminal sanctions faced by a corporation found guilty of having committed a criminal act into several categories, as follows:           

(i) Primary Corporate Criminal Sanctions (Article 121)

1. For financial penalties, corporations are subject to a minimum Category IV fine (in the maximum amount of IDR 200 million), if no law states otherwise;

1. For crimes punishable with imprisonment of less than seven years, corporations are subject to a minimum Category VI fine (in the maximum amount of IDR 2 billion);

1. For crimes punishable with imprisonment of between 7 and 15 years, corporations are subject to a minimum Category VII fine (in the maximum amount of IDR 5 billion); and

1. For crimes punishable with imprisonment of 20 years or more, life sentences or capital punishment, corporations are subject to a minimum Category VIII fine (in the maximum amount of IDR 50 billion).

It should be noted that the above fines must be paid during the period set out in the court decision and may be paid in instalments.

(ii) Additional Corporate Criminal Sanctions (Article 120(1))

In addition to the above primary corporate criminal sanctions, corporations that are found guilty of committing a criminal act are also subject to the following sanctions and penalties:

1. Indemnity payments;

1. Restitution for any impact caused by the corporate criminal act;

1. Completion of neglected obligations;

1. Fulfilment of customary (adat) obligations;

1. Payments for work training;

1. Confiscation of any assets or profits that resulted from the corporate crimes;

1. Announcement of the court decision;

1. Revocation of certain licenses;

1. Permanent ban on undertaking certain activities;

1. Termination of all or part of a corporation’s places of business and/or activities;

1. Suspension of all or part of a corporation’s business activities; and

1. Liquidation of corporation.

The sanctions stipulated in points (8), (10) and (11) above may only be imposed for a period of two years.

(iii) Under Article 123 of the new KUHP, the following measures may also be taken against a corporation found guilty of a criminal act:

1. Acquisition of the corporation;

1. Inclusion of the corporation on an official watchlist; and/or

1. Placement of the corporation under government control.

Conclusion

It is important to note that enforcement of the new KUHP will begin three years from its enactment, which will be in December 2025, though corporations in general can still face criminal sanctions under MA Reg 13/2016. While it is still unclear how the new KUHP will be enforced in practice, corporations in Indonesia should be aware of the new Criminal Code and its provisions on corporate criminal liability.

By SSEK, Indonesia, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact indonesia@transatlanticlaw.com

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. TransatlanticLaw International Limited, based at 42 Brook Street, London W1K 5DB, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.