Regulatory Updates : Covid19 in Indonesia

Rio Lassatrio

Partner, LHBM Counsel

LEGAL UPDATES: COVID-19 OUTBREAK IN INDONESIA

INTRODUCTION

The Indonesian government has been busy to battle the spread of the Corona Virus Disease 2019 (“COVID-19”). Since the outbreak, there are regulatory measures that are taken into place to address the effects of COVID-19.

Those regulations of course will be monitored and reviewed by the relevant authorities, depending on the developments of the spread of COVID-19. However, some of them might be still relevant in the implementation of the so-called “new normal”, while others may only relevant during the outbreak of COVID-19.

Please note that are various regulations issued by the Indonesian government during the outbreak of COVID-19. Thus, this update only highlights some of the regulations, in order to provide general overview on the effort of Indonesian government to address the COVID-19 pandemic and keep the economy running.

In general, the update will provide brief descriptions on:

(1)      COVID-19 – as Force Majeure Events;

(2)      Large-Scale Social Restriction (Pembatasan Sosial Berskala Besar – PSBB);

(3)      Transportation Control;

(4)      Electronic Litigation in Criminal Proceedings;

(5)      Mitigation of Banking Problems; and

(6)      Acceleration of Pharmaceutical Products Registration;

EXECUTIVE SUMMARY

It is agreed that restriction policies, such as transportation control and social distancing should be regularly monitored and reviewed, as these restrictions might affect human mobility and businesses process. Once the outbreak of COVID-19 can be contained, many believe that those restriction policies should be adjusted accordingly.

However, some policies under certain regulations might also be useful in the implementation of the so-called “new normal”, considering the use of technology and fast-track mechanism are some of the remarkable examples.

For example, teleconference is now being implemented in criminal hearings and this technology would be beneficial for society and businesses, even after the outbreak of COVID-19.  As for the drug registration, the Drug and Food Control Agency (“BPOM”) is accelerating product registration for any drugs related to COVID-19. For example, their pre-registration process would be cut from 40 business days to 6 hours. Indeed, this fast-track mechanism should be maintained in the post-COVID-19 outbreak.

In the banking sector, the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) has been preparing some mitigations. One of the notable mitigations is to force banks to conduct corporate actions in order to mitigate the impacts of COVID-19. This authority emphasis the strong control of OJK to tackle issues that endanger the stability of financial system.

In terms of the contractual issues, COVID-19 would be a good lesson for business actors to re-think or redraft a force majeure event in their future contract.            

DISCUSSION

  1. COVID-19 – as Force Majeure Events

In order to respond COVID-19, President of the Republic of Indonesia has declared COVID-19 as a non-natural national disaster through the issuance of Decree of the President No. 12 of 2020 on the Stipulation of the Non-Natural Disaster of the Spread of COVID-19 as a National Disaster (“President Decree 12/2020”). President Decree 12/2020 has been in force on 13 April 2020.

With the status of COVID-19 as a non-natural national disaster, questions arise whether this situation can trigger a force majeure event in a contract. The answer is not straightforward and automatically deemed as a force majeure since a close review to the contact is necessary to address whether a performance/ obligation of one party is affected by the outbreak.

Under the Indonesian Civil Code (the “ICC”), the concept of force majeure is regulated under Article 1244 and 1245. It is essentially state that an obligor acting in good faith should not be held liable for a late or non-performance of his/her obligations which are caused by any circumstances that are unforeseeable or beyond his/her control.

To invoke a force majeure, one must satisfy certain conditions as follows:

(1)    the occurrence of an unforeseeable event;

(2)    the unforeseeable event is beyond the defaulting party;

(3)    the defaulting party is unable to perform its obligations due to the unforeseeable event; and

(4)    the defaulting party has not acted in bad faith.

It should be note that if a force majeure event is not specifically provided in the contract, the party invoking the force majeure must prove that the force majeure has met the conditions as out above.

In short, before invoking a force majeure event or responding to a force majeure notification, the parties should (i) review the force majeure clause in the contact ; (ii) determine whether a performance/obligation of a party is affected; (iii) determine whether the event is unforeseeable and beyond the ability of the affected party; and (iv) send notification of a force majeure event or respond to the notification of a force majeure event.

  1. Large-Scale Social Restriction (Pembatasan Sosial Berskala Besar – “PSBB”)

The Minister of Health (“MOH”) has taken a specific measure to combat COVID-19 by issuing Regulation of the MOH No. 9 of 2020 on Guidelines on Large-Scale Social Restriction for the Acceleration of Mitigation of COVID-19 (“MOH 9/2020”). MOH 9/2020 has been in force since 3 April 2020.

Essentially, MOH 9/2020 aims to provide guidelines for certain regions that will implement PSBB.

In determining whether a region is permissible to implement PSBB, MOH will rely on the following criteria:

  1. Total number of cases and/or deaths resulting from COVID-19 significantly and quickly increase and spread to several regions; and
  1. There is an epidemiological link with similar cases in other regions or countries.

With the issuance of MOH 9/2020, governors, regents, or mayors may submit their proposals on the implementation of PSBB within their respective regions to MOH if they believe that their respective regions have met the criteria as set out in MOH 9/2020.

Once MOH approved PSBB in a certain region, business and human activities may be affected because the relevant local government shall restrict certain public activities, such as (1) temporary closures of schools and workplaces; (2) restrictions on religious activities; (3) restrictions on activities which take place at public facilities or locations; (4) restrictions on social and cultural activities; (5) restrictions on mode of transportation; and (6) restrictions on other security and defence-related activities. However, temporary closures of workplaces may be exempted for certain businesses that provide essential daily services (e.g. finance, exports and imports, logistics, and health services).

In terms of sanctions, any person must comply and participate in the implementation of PSBB, otherwise the non-compliant person will be punishable for a maximum of one year in prison and/or a maximum fine of one hundred million rupiah according to Article 93 of Law No. 6 of 2018 on Health Quarantine.

PSBB shall be implemented during the longest incubation period and can be extended if COVID-19 remains to spread across the given regions. However, MOH may revoke PSBB in the given regions if the given regions are no longer to meet the criteria as set out in MOH 9/2020. In other words, the implementation of PSBB will not last forever, depending on the spread of COVID-19 in the given regions. Nowadays, the implementation of PSBB is not only implemented in Jakarta but also in other regions across Indonesia. Therefore, it is advised for business entities and people to always update COVID-19 policies and regulations in their respective regions.

  1. Transportation Control

In response to the COVID-19 pandemic, the Minister of Transportation issued Regulation No. PM 18 of 2020 on Transportation Control for the Prevention of the Spread of COVID-19 (“MOT Regulation 18/2020”). MOT Regulation 18/2020 has been in force since 9 April 2020.

In overall, MOT Regulation 18/2020 aims to control transportation flow in order to prevent the spread of COVID-19, while still providing the needs of the community for transportation facilities.

Passengers travelling across Indonesia currently shall follow certain protocols as set out in MOT Regulation 18/2020. For example, they shall wear masks and prepare their personal devices, keep physical distancing, and follow procedures as directed by officials. Similarly, any business entities engaged in delivering or receiving goods (e.g. transportation infrastructure operators) shall comply with the protocols, such as the implementation of physical distancing and sterilisation of vehicles, including all goods which are to be delivered or received.

In terms of transportation control within PSSB areas, MOT Regulation 18/2020 not only imposes physical distancing for passengers but also a certain limitation on passenger numbers for certain modes of transportation. For example, passenger numbers for trains are limited to a maximum of 35% until 65% of the total relevant seating capacities, depending on the type of train. Meanwhile, the maximum passenger numbers for cars, busses, sea transportations, and planes are 50% of the total relevant seating capacities.

  1. Electronic Litigation in Criminal Proceedings

On 13 April 2020, the Supreme Court, the Attorney General’s Office and the Ministry of Law and Human Rights agreed to enter into a joint agreement on the implementation of Trials by Teleconference 402/DJU/HM.01.1/4/2020, KEP-17/E/EJP/04/2020, PAS-08.HH.05.05 of 2020 (“Joint Agreement 2020”) in order to prevent the spread of COVID-19.

The said Joint Agreement 2020 provides a legal basis for attorneys general and court judges to implement criminal hearings by teleconference.

The Joint Agreement 2020 sets out authorities and responsibilities for the respective parties. For example, the Supreme Court and the Attorney General’s Office shall provide adequate supporting facilities and infrastructure for the purpose of holding teleconference trials at district courts and at the Attorney General’s Office respectively. Similarly, the Ministry of Law and Human Rights shall provide the same facilities and infrastructure at the detention or prison facilities for prisoners. By doing teleconference, criminal hearings continue to operate, even during the outbreak of COVID-19.

It is noteworthy that although the Joint Agreement 2020 was issued as a measurement to address the outbreak of COVID-19, but in a longer term, the electronic trials, arguably could bring efficiency in the Indonesia’s courts system. Thus, the Joint Agreement 2020 should be considered to be extended and remain in effect, even after the COVID-19 outbreak.

  1. Mitigation of Banking Problems

In line with the Indonesian government intention to minimise financial adverse effects due to the COVID-19 outbreak, OJK has issued OJK Regulation No. 18/POJK/03/2020 on Written Orders for the Mitigation of Banking Problems (“POJK 18/2020”). POJK 18/2020 has been effective as of 21 April 2020.

In general, POJK 18/2020 provides authority for OJK to force banks to conduct certain corporate actions, such as mergers, consolidations, acquisitions, and/or integrations, depending on certain conditions.

OJK will assess banks which will be given a written order to carry out a certain corporate action, based on:

(1)    Non-performing banks: (i) having financial issues that frustrate their business continuity or considered unable to handle current or future pressure (based on OJK’s assessment) and/or (ii) their shareholders are unable to strengthen the banks.

(2)    Performing banks: having health level at least composite rating-3 (PK-3) or cukup sehat after a certain corporate action has completely finished.

Once banks received a written order from OJK, they must prepare an action plan to be submitted to OJK, such as procedures and timeline of such certain corporate action. Then, the said banks must carry out the action plan and update its development to OJK, and the failure to do so will subject to administrative sanctions (e.g. written warning, downgrade the status of the banks, or temporary suspension on the banks business activities).

POJK 18/2020 will encourage banks to be more aware and attentive to their state of financial conditions. Banks shall prepare other alternative mitigations if they have problems that fall under conditions as set out in POJK 18/2020. Such alternatives may be used by the banks to avoid receiving a written order from OJK.   

  1. Acceleration of Pharmaceutical Products Registration

In order to battle COVID-19 outbreak, BPOM has issued Decree of Head of BPOM No. HK.02.02.1.2.03.20.134 of 2020 on Arrangement of Drugs Guidelines on Handling COVID-19 (“BPOM Decree 02/2020”). BPOM Decree has been effective on 31 March 2020.

In general, BPOM Decree 02/2020 sets out guidelines on handling COVID-19 outbreak. The guidelines provide certain strategic measures to handle COVID-19. One of the significant guidelines of BPOM Decree 02/2020 is the acceleration of pharmaceutical productsregistration.  

Under the guidelines in BPOM Decree 02/2020, BPOM committed to accelerate the registration process for any drugs that could be used to treat COVID-19. Under the normal procedure, the registration process may take months or even years to complete due to multiple layers that should be done. With the issuance of BPOM Decree 02/2020, this lengthy process would be shortened in order to support the availability of any drugs related to COVID-19. For example, BPOM set out that the pre-registration process from 40 business days to 6 hours during the outbreak of COVID-19. Then, the registration approval would be granted within 20 business days for a new drug and 5 business days for a generic drug. Similarly, for pharmaceuticals companies producing COVID-19 drugs would be granted their Good Manufacturing Practice (Cara Pembuatan Obat Yang Baik – CPOB) within 7 business days instead of 35 business days.

BPOM Decree 02/2020 is temporary in nature. It means that BPOM would review and/or amend the implementation of BPOM Decree 02/2020 based on developments of COVID-19 outbreak. However, if the streamlining registration process could be maintained and implemented even after the outbreak, it would definitely provide benefits for business actors engaged in health sectors as there would be increased in efficiency, especially in the registration process of drugs.

[Disclaimer: this publication intends to provide general information on the latest legal and regulatory issues in Indonesia and should not be regarded as legal advice].