The Supreme Court of the Republic of Indonesia has rejected the judicial review of Presidential Regulation No.44/2016 of the Negative Investment List (NIL) relating to the 70% foreign capital ownership of ASEAN member countries in the shipping/maritime industry in Indonesia. The petitioner considered the provision violates the cabotage principle in the Shipping Law. In the case number 7P/HUM/2017, The Supreme Court rejected the request of judicial review and expressed its support for the ASEAN Framework Agreement on Services and ASEAN Economic Community.
Facts
In 2017, an Indonesian citizen Ucok Samuel B Hutapea submitted a judicial review of the NIL Presidential Regulation to the Supreme Court because it was against the Indonesia Shipping Law. He assessed the Regulation, which opens foreign ownership of sea transportation (both for goods and people) in Indonesia up to a maximum of 70% if investors originating from ASEAN countries, is not only detrimental to him but also other local business actors in the maritime sector.
He considered the regulation is contrary to the cabotage principle stipulated in the Shipping Law. According to him, the basic norm or principal principle of the cabotage principle is to support national shipping businesses to be carried out by Indonesian citizens and/or Indonesian legal entities for the prosperity of the Indonesian nation by limiting foreign penetration in the Indonesian maritime industry.
In the general explanation of the Shipping Law, it states "the regulation for the transportation sector in the sea contains the principle of implementing the cabotage principle by empowering national sea transportation which provides a conducive climate for advancing the marine transportation industry, including the ease of taxation and capital in the procurement of ships and the existence of long-term transport contracts."
Furthermore, the cabotage principle is clearly visible in Article 8 paragraph (1) of the Shipping Law and its explanation, as follows: Article 8 paragraph (1) of the Shipping Law: "Domestic sea transportation activities are carried out by national sea transportation companies using ships with flags Indonesia and manned by Indonesian crews "; Elucidation of Article 8 paragraph (1) of the Shipping Law: "The use of Indonesian-flagged ships by national sea transportation companies is intended for the implementation of the cabotage principle in order to protect the sovereignty of the State (sovereignty) and support the realization of the archipelago's vision and provide the broadest possible business opportunity for national companies of sea transportation in obtaining a share of cargo."
Judgment
The panel of Supreme Court Justices consisting of Irfan Fachruddin (Chairman), Yosran and Hary Djatmiko (respectively as members) rejected the request of judicial review. The panel stated that philosophically the stipulation of NIL Presidential Regulation is aimed to increase investment activities, both from within and outside the country, to accelerate development while still protecting micro, small and medium enterprises, cooperatives and various national strategic sectors. It also aims to increase the economic competitiveness in the face of the ASEAN Economic Community (AEC) and the dynamics of economic globalization.
Furthermore, the panel explained its position in favour of AFAS and AEC, as follows:
“Whereas through the ASEAN Framework Agreement on Services (AFAS) and AEC, the everyone of ASEAN national should be able to take advantage of market opportunities in 10 (ten) ASEAN countries with a population of more than 600 (six hundred) million. Indonesia as one of the ASEAN member countries who ratified the AFAS international agreement should both open up and not be allowed to discriminate, including protection and barrier to entry for the particular shipping business industry for ASEAN member countries, not non-ASEAN countries.”
"Whereas with the existence of the AEC, there is a reciprocal and mutually beneficial relationship between ASEAN member countries so that it is hoped that there will be a transfer of knowledge and technology from foreign investors to national sea transportation actors. So that, it can lead to becoming a modern industry and is able to compete in international shipping, thus enlarges regional and international market opportunities for goods and services products from Indonesia, especially in the field of Indonesian sea transportation, the business sector of Overseas Sea Transportation for Passengers and Overseas Sea Mode for Goods, so that they can compete in ASEAN countries with capital ownership which is the same, namely 70%. Competition in the business world is an absolute requirement in order to create a market mechanism. If there is business competition, the actors are required to continue to improve the products and services produced and continue to innovate, strive to provide products or services efficiently;"
Commentary
In Indonesia legal system, judicial reviews are carried out by two institutions with different objects. First, the Constitutional Court hears judicial review of laws against the constitution. Second, the Supreme Court adjudicates a judicial review of regulations under laws (such as Government Regulations, Presidential Regulations, etc) against the laws. In the judicial review process so far, there have not been many judicial reviews related to ASEAN legal instruments that have been transformed into Indonesian law.
Apart from this case, previously in 2013, the Constitutional Court had also reviewed Law Number 38 of 2008 concerning the Ratification of the ASEAN Charter. In its decision, the Court rejected the judicial review by emphasizing that the ASEAN Charter was not against the Indonesian constitution. Meanwhile, two constitutional judges expressed a dissenting opinion, arguing that the review of laws that ratify international agreements such as the ASEAN Charter should not be able to be submitted to the Constitutional Court because it is not under its authority, so the case should be declared inadmissible.
The decision of the Supreme Court Panel of Justices in the judicial review case for the NIL Presidential Regulation is in line with the Constitutional Court previous decision and at the same time shows that ASEAN legal instruments are highly valued in Indonesia's domestic courts. The Supreme Court panel of judges realizes that the implementation of AFAS and AEC is an essential matter for the Indonesian nation, as part of the ASEAN community. They also saw this issue from a broader perspective, thus asking Indonesia to carry out AEC consistently. The Supreme Court's support is, of course, precious for the sustainability of ASEAN integration, especially from a legal perspective. In the absence of a judiciary as an enforcer of ASEAN legal instruments, like the European Court of Justice in the European Union, the role of domestic courts in the ASEAN Member States is urgently needed to support deeper ASEAN integration. By Ali Salmande, SH, LLM (Alumnus of ASEAN Law Academy 2019 and Researcher of Kolegium Jurist Institute) Photo Credit: Photo by CEphoto, Uwe Aranas
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