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1 Environmental Policy and its Enforcement
1.1 What is the basis of environmental policy in your jurisdiction and which agencies/bodies administer and enforce environmental law?
The foundation of environmental policy in Indonesia can be traced to Law No. 32 of 2009 on Environmental Protection and Management (“Indonesian Environmental Law”), as amended by Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation (“Job Creation Law Amending the Indonesian Environmental Law”), Government Regulation No. 22 of 2021 on the Implementation of Environmental Protection and Management (“GR 22/2021”) and its subordinate regulations.
The administering bodies are:
a. The Central Government, led by the President and assisted by the Vice President and the Minister of Environment and Forestry (“MEF”), as defined in the Job Creation Law Amending the Indonesian Environmental Law.
b. Local Government, represented by the regional head, manages government affairs within autonomous regions, following provisions outlined in Law No. 23 of 2014 concerning the Local Government (“Local Government Law”), as amended by Government Regulation in lieu of Law No. 2 of 2022 on Job Creation (“Job Creation Law Amending the Indonesian Environmental Law”).
1.2 What approach do such agencies/bodies take to the enforcement of environmental law?
Indonesian Environmental Law outlines crucial aspects of environmental protection and management:
a. Planning: Includes environmental inventory, eco-region determination, and the creation of Environmental Protection and Management Plans (“RPPLH”).
b. Utilization of natural resources: Conducted according to the RPPLH, considering environmental sustainability, processes, productivity, safety, quality of life, and welfare. Carrying capacity is determined by the MEF, Governor, or Regent/Mayor.
c. Control measures: Encompass prevention, mitigation, and restoration strategies. Prevention involves elements such as strategic environmental assessment, spatial planning, and adherence to environmental quality standards. Mitigation, per Article 32, includes public awareness, pollution source isolation, and measures to cease damage. Restoration efforts (Article 54) focus on stopping pollution sources, remediation, rehabilitation, and utilising suitable scientific and technological methods.
d. Maintenance: Achieved through conservation, natural resource reservation, and preservation of atmospheric functions.
e. Supervision: Conducted by the Central or Regional Government to ensure legal compliance, with the MEF overseeing serious violations.
f. Law enforcement: Involves administrative sanctions such as warnings, coercion, fines, suspension, and revocation of licenses. Criminal sanctions are also addressed.
1.3 To what extent are public authorities required to provide environment-related information to interested persons (including members of the public)?
Public authorities, including the Central Government and regional Governments, must provide comprehensive environmental information, as mandated by Article 62 of the Indonesian Environmental Law. This article requires the establishment of an integrated and coordinated environmental information system for mandatory public disclosure. The system must include information on environmental status, environment vulnerability maps, and other relevant environmental details. Additionally, Article 63 of the Job Creation Law Amending the Indonesian Environmental Law delegates responsibilities for managing environmental information to the Central Government, Provincial Governments, and Regency/City Governments, each following specified norms, standards, procedures, and criteria.
2 Environmental Permits
2.1 When is an environmental permit required, and may environmental permits be transferred from one person to another?
An “environmental approval”, previously known as an environmental permit, is now required for all Business and/or Activity with environmental impacts, following GR 22/2021 and the Job Creation Law Amending the Indonesian Environmental Law. This approval, specified in Article 3 of GR 22/2021, is necessary for obtaining business licenses or Government approvals and is issued to business entities or Government agencies. Notably, the environmental approval is non-transferable.
2.2 What rights are there to appeal against the decision of an environmental regulator not to grant an environmental permit or in respect of the conditions contained in an environmental permit?
In Indonesia, individuals or entities that receive an unfavourable decision from an environmental regulator, either through the denial of an environmental permit or due to disputes regarding the conditions contained within an environmental permit, have the right to appeal such decisions. The legal framework for these appeals is outlined in several regulations, including the Environmental Management Act No. 32 of 2009 and GR 22/2021.
Here are the key points regarding the appeal process:
(a) Administrative appeal: Pursuant to Article 37 of the Indonesian Environmental Law, the initial step for an appeal is often through the administrative route, where the aggrieved party can submit an objection or another application to the same environmental authority that issued the decision.
(b) Court proceedings: If the issue cannot be resolved through administrative appeals, the party may seek resolution through state administrative court/pengadilan tata usaha negara for not granting the environmental permit or for cancelling the environmental permit, pursuant to Law Number 5 of 1986 concerning the state administrative court as lastly amended by Law Number 51 of 2009 (the “Administrative Court Law”). Furthermore, pursuant to the Indonesian Environmental Law, environmental dispute resolution can be pursued through court or out-of-court. The choice of environmental dispute resolution is voluntarily made by the disputing parties. Filing a lawsuit in court is only possible if the chosen out-of-court dispute resolution effort is declared unsuccessful by one or all of the disputing parties. Out-of-court environmental dispute resolution is conducted to reach an agreement on: (a) the form and amount of compensation; (b) remedial actions due to pollution and/or destruction; (c) specific actions to ensure the non-recurrence of pollution and/or destruction; and/or (d) actions to prevent the emergence of negative impacts on the environment. Out-of-court dispute resolution does not apply to environmental criminal acts as regulated in this Law. In the out-of-court resolution of environmental disputes, the services of mediators and/or arbitrators can be used to help resolve environmental disputes.
(c) Judicial review: Parties dissatisfied with the outcomes of state administrative court decisions or environmental dispute resolution decisions may seek further recourse through a judicial review by higher courts. The judicial review process allows for the examination of the legality and appropriateness of the regulator’s decision against the backdrop of Indonesian law and regulations.
(d) Public participation and non-governmental organisations (“NGOs”): It is also worth noting that the Indonesian Environmental Law emphasises the importance of public participation in environmental decision-making. Affected communities and NGOs have the right to provide input on environmental permits and, if necessary, challenge decisions that they believe are harmful to the environment or public health.
2.3 Is it necessary to conduct environmental audits or environmental impact assessments for particularly polluting industries or other installations/projects?
Yes. Conducting environmental audits or Environmental Impact Assessments is crucial for industries or projects with significant environmental impacts, as mandated by the Indonesian Environmental Law. This law requires that any activity likely to have a significant environmental impact undergo an environmental impact assessment, known locally as “AMDAL”, before proceeding. The AMDAL process includes preparing and obtaining approval for several key documents, including an Environmental Management Plan (“EMP”) and Environmental Monitoring Plan (“RPL ”), to ensure that potential environmental damages are identified, predicted, evaluated, and mitigated.
For projects with a smaller environmental footprint, a simpler environmental document, known as UKL-UPL, may suffice. These assessments are vital for ensuring projects are environmentally responsible, comply with legal requirements, and align with sustainable development goals. Failure to conduct these assessments can lead to legal penalties, operational suspension, or permit revocation, alongside reputational damage. Thus, for particularly polluting industries, thorough Environmental Impact Assessments are not just a regulatory requirement but a critical step towards sustainable operation and environmental protection in Indonesia.
2.4 What enforcement powers do environmental regulators have in connection with the violation of permits?
In Indonesia, environmental regulators have robust enforcement powers to address permit violations, under the Indonesian Environmental Law. These powers include:
(a) Inspection and monitoring: To ensure compliance with environmental permits and laws.
(b) Issuance of warnings: Regulators can issue warnings for non-compliance, demanding corrective actions.
(c) Suspension of permits: Permits can be temporarily suspended until compliance issues are resolved.
(d) Revocation of permits: In cases of severe non-compliance, environmental permits can be revoked, halting operations.
(e) Administrative sanctions: Violators may face fines, mandatory cleanup measures, and other penalties.
(f) Criminal prosecution: Serious violations can lead to criminal charges, including imprisonment and fines.
(g) Public participation: The law supports community and organizational involvement in reporting and addressing violations.
These measures aim to ensure environmental responsibility and adherence to legal standards, with significant legal and financial implications for non-compliance.
3 Waste
3.1 How is waste defined and do certain categories of waste involve additional duties or controls?
Under Government regulation (“GR”) 22/2021 and the Job Creation Law Amending the Indonesian Environmental Law, waste is defined as the residue of a business and/or activity. Waste is categorized based on its source, composition, and potential impact on human health and the environment. The categorisation distinguishes between non-hazardous and hazardous waste, with hazardous waste requiring more stringent controls due to its potential to cause pollution or harm.
The following comprise categories of waste and associated controls:
(a) Hazardous waste: As per these regulations, hazardous waste includes materials that are toxic, reactive, explosive, flammable, or corrosive. This category also encompasses any waste containing substances in quantities or concentrations that pose a threat to health and the environment. Hazardous waste management involves specific duties such as safe collection, treatment, storage, transportation, and disposal, all of which must comply with detailed standards and procedures to minimize risk.
(b) Non-hazardous waste: This generally includes household waste and other types of waste that do not meet the criteria for hazardous waste. While the controls for non-hazardous waste are less stringent, there are still regulations in place to ensure proper waste management practices, aiming to reduce the volume of waste sent to landfills and encourage recycling and resource recovery.
3.2 To what extent is a producer of waste permitted to store and/or dispose of it on the site where it was produced?
Pursuant to GR No. 22/2021, to effectively manage the storage of Hazardous Waste, every producer of hazardous waste must adhere to the following requirements:
(a) comply with the hazardous waste storage standards that are integrated into the Business Identification Number (Nomor Induk Berusaha – “NIB”), applicable to hazardous waste producers engaged in business and/or activities that are required to have an Environmental Management and Monitoring Commitment Statement/Surat Pernyataan Kesanggupan Pengelolaan dan Pemantauan Lingkungan Hidup (“SPPL”); and/or
(b) adhere to the technical specifications for hazardous waste storage as outlined in the environmental permit. This applies to producers of hazardous waste from businesses and/or activities that are obligated to conduct an AMDAL or Environmental Management and Monitoring Plan/Upaya Pengelolaan Lingkungan Hidup dan Upaya Pemantauan Lingkungan Hidup (UKL-UPL), as well as to Government Agencies that generate hazardous waste.
The storage site for hazardous waste must fall under the jurisdiction and control of the producer of the hazardous waste.
Moreover, producers of non-hazardous waste are mandated to store the non-hazardous waste they generate until further processing is undertaken. The storage site for non-hazardous waste must be located within the operational area of the non-hazardous waste producer, as specified in the environmental approval documents.
In addition to storage requirements, every person is allowed to dispose of waste into the environmental media under the following conditions:
a. the disposal meets the environmental quality standards; and
b. approval is obtained from the Central Government or local Government.
For the disposal of hazardous waste, it is strictly prohibited for any individual to dump hazardous waste into environmental media without explicit approval from the Central Government. It is imperative for anyone intending to dispose of hazardous waste into the environment to obtain governmental approval. This approval is provided in the form of technical approval for disposal activities and constitutes the foundation for the issuance of environmental approval. Technical approval is specifically granted for the disposal of hazardous waste into environmental media, including:
a. land; and
b. sea.
These stipulations highlight the critical importance of adhering to legal and regulatory frameworks for the storage and disposal of waste, thereby ensuring the protection of the environment and public health safety.
3.3 Do producers of waste retain any residual liability in respect of the waste where they have transferred it to another person for disposal/treatment off-site (e.g. if the transferee/ultimate disposer goes bankrupt/disappears)?
Based on the Indonesian Environmental Law, producers of waste may retain residual liability for their waste even after it has been transferred to another party for off-site disposal or treatment. This principle, embedded within regulations such as GR 22/2021, aims to ensure producers are accountable for their waste throughout its lifecycle.
Should the party responsible for disposal or treatment (the transferee) become insolvent or disappear, the original waste producer could be liable for any resulting environmental damage. This liability may include cleanup costs, fines, and other penalties.
3.4 To what extent do waste producers have obligations regarding the take-back and recovery of their waste?
Under Indonesian legislation, particularly Law Number 18 of 2008, Government Regulation Number 81 of 2012, and Minister of Environment and Forestry Regulation Number 75 of 2019, waste producers are mandated to actively participate in the take-back and recovery of their waste. These obligations are detailed as follows:
1. Take-back programmes: Implementation of programmes to collect used products and packaging for recycling or proper disposal.
2. Waste recovery: Ensuring waste is recycled or processed in environmentally friendly ways to minimise its ecological footprint.
3. Product design: Development of products that are easier to recycle or have reduced environmental impact at their life’s end.
4. Public education: Educating the public on waste management and promoting participation in recycling programmes.
5. Reporting and compliance: Mandatory reporting to authorities on waste management efforts, subject to monitoring and sanctions for non-compliance.
These regulations apply broadly across producers, demanding comprehensive involvement in waste reduction, management, and recycling to foster sustainable environmental practices. Non-adherence can lead to administrative penalties, including fines or operational restrictions.
4 Liabilities
4.1 What types of liabilities can arise where there is a breach of environmental laws and/or permits, and what defences are typically available?
In Indonesia, breaches of environmental laws and/or permits can lead to a spectrum of liabilities for individuals and corporations alike. These liabilities are primarily categorised into administrative, civil, and criminal liabilities, as outlined in the Indonesian Environmental Law. Each type of liability serves as a mechanism to enforce environmental compliance and accountability.
1. Administrative liability: This includes sanctions such as warnings, fines, temporary suspension of business activities, or revocation of environmental permits. Administrative sanctions are often the first line of response to non-compliance with environmental laws or permit conditions.
2. Civil liability: Civil liabilities involve the obligation to restore environmental damage and/or compensate for any loss or damage caused by environmental harm. This can include the costs of rehabilitation or restoration of the environment to its original state, as well as compensation to affected parties for loss or damage suffered.
3. Criminal liability: In cases of severe breaches, criminal charges may be brought against individuals or corporate officers responsible for the violation. Penalties can range from fines to imprisonment, depending on the severity and impact of the environmental harm caused.
Defenses available:
• Compliance: Demonstrating that all relevant environmental regulations and permit conditions were complied with at the time the alleged breach occurred.
• Lack of causation: Arguing that the environmental damage was not caused by the actions of the accused or that there is no direct link between the actions and the environmental harm.
• Force majeure: Claiming that the breach was the result of an uncontrollable event (natural disaster, etc.) that could not have been anticipated or prevented.
• Due diligence: Showing that reasonable care was taken to prevent the breach, including adherence to industry standards, regular maintenance, and training of personnel.
It is important for entities operating in Indonesia to be proactive in their environmental compliance efforts. This includes regular environmental audits, obtaining and adhering to all necessary permits, and implementing effective environmental management systems. By doing so, entities not only minimise their risk of liability but also contribute to sustainable environmental stewardship.
4.2 Can an operator be liable for environmental damage notwithstanding that the polluting activity is operated within permit limits?
In Indonesia, the principle of liability for environmental damage does not solely depend on whether the polluting activity operates within permit limits. Under the Indonesian Environmental Law, operators can indeed be held liable for environmental damage, even if their activities are conducted within the bounds of issued permits. This principle is rooted in the concept of strict liability, which applies to certain hazardous activities that pose a risk to the environment, regardless of fault or negligence.
4.3 Can directors and officers of corporations attract personal liabilities for environmental wrongdoing, and to what extent may they get insurance or rely on other indemnity protection in respect of such liabilities?
In Indonesia, directors and officers of corporations can be personally liable for environmental wrongdoing under certain conditions, as outlined in the Indonesian Environmental Law. This law holds corporate leaders accountable for environmental harm caused by their decisions, actions, or negligence, including failure to comply with environmental laws, prevent foreseeable damage, or manage environmental risks effectively.
Personal liabilities may include:
(a) Civil liabilities: Compensation for damages and environmental restoration efforts.
(b) Criminal liabilities: Fines and Possible imprisonment for severe violations.
Directors and officers can mitigate these risks through Directors and Officers (“D&O”) liability insurance, covering legal costs and judgments from environmental lawsuits. However, D&O insurance may not cover intentional illegal acts or criminal activities, offering limited protection.
Corporations might also provide indemnity agreements, covering legal expenses and liabilities, but these do not absolve individuals from responsibility for environmental harm.
Thus, while protections exist, they are not all-encompassing. Directors and officers must prioritise compliance with environmental laws and proactive risk management as part of responsible corporate governance.
4.4 What are the different implications from an environmental liability perspective of a share sale on the one hand and an asset purchase on the other?
In Indonesia, the implications of environmental liability in the context of a share sale versus an asset purchase are significantly different, primarily due to how liabilities are transferred in each transaction type under Indonesian law, including environmental laws and regulations.
In a share sale, the buyer acquires shares in the company that owns the assets, effectively taking over the company along with all its liabilities, including existing environmental liabilities. Since the company remains the same legal entity, all operational permits, licences, and any environmental liabilities (whether known or unknown) continue with the company. This means the buyer inherits the responsibility for past, present, and future environmental compliance and liabilities of the company. The Indonesian Environmental Law does not directly address share sales but, under corporate law principles, the liabilities remain with the company, irrespective of the change in ownership.
Conversely, in an asset purchase, the buyer acquires specific assets rather than shares in the company. This method allows the buyer to selectively acquire assets and, potentially, to avoid taking on the company’s liabilities, including environmental liabilities, associated with those assets. However, it is crucial to note that under Indonesian law, certain environmental liabilities may still be transferred with the asset, especially if regulatory approvals or permits are required to be transferred to the new owner. Detailed due diligence is essential to identify any such liabilities. The transfer of environmental permits and licences may be subject to approval from the Ministry of Environment and Forestry or local environmental agencies, as stipulated by specific regulations related to environmental permits.
Legal implications and strategies:
a) Due diligence: Regardless of the transaction type, thorough environmental due diligence is crucial. For share sales, due diligence helps understand the full scope of environmental liabilities the buyer is inheriting. In asset purchases, it identifies liabilities that may transfer with the assets and any necessary permit transfers.
b) Indemnification: Parties may negotiate indemnification clauses to address environmental liabilities. In share sales, buyers may seek indemnification against pre-existing liabilities. In asset purchases, indemnification can cover liabilities that are not discovered during due diligence but later arise from the purchased assets.
c) Regulatory compliance: Compliance with the Indonesian Environmental Law and other relevant regulations is paramount. This includes ensuring that all necessary environmental permits and licences are correctly transferred (in asset purchases) or reviewed (in share sales) to reflect the new ownership while maintaining compliance with environmental standards.
In summary, the choice between a share sale and an asset purchase has distinct implications for environmental liability. Share sales typically involve inheriting all company liabilities, while asset purchases may allow for more selective assumption of liabilities. However, environmental liabilities in asset purchases can be complex, requiring careful review of permits and potential historical liabilities associated with the assets.
4.5 To what extent may lenders be liable for environmental wrongdoing and/or remediation costs?
In Indonesia, the extent to which lenders can be held liable for environmental wrongdoing and/or remediation costs associated with their borrowers’ activities is relatively limited but not entirely absent. The primary legal framework governing environmental protection and management is the Indonesian Environmental Law. This law, along with other relevant regulations, focuses on the direct responsibility of companies and their management for environmental compliance and remediation. However, there are circumstances under which lenders could potentially face liability, albeit indirectly, among others:
(a) Direct involvement in management: If a lender becomes actively involved in the management of a borrower’s business, particularly in decisions that lead to environmental damage, the lender could potentially be held liable for such damage. This involvement would need to be significant enough to influence the environmental policies and practices of the borrower.
(b) Security and foreclosure: In cases where a lender forecloses on property used as security for a loan and takes control of the property, the lender might be responsible for any existing environmental liabilities associated with that property. This would depend on the nature of the contamination and the extent of the lender’s control over the property.
(c) Environmental due diligence: Lenders are increasingly expected to conduct environmental due diligence before extending credit, especially for projects with significant environmental impacts. Failure to identify environmental risks and require adequate safeguards from the borrower could, in some cases, expose the lender to reputational risks and potential indirect liability if environmental harm occurs and the borrower fails to address it.
Legal protections and limitations:
• Indonesian law does not explicitly address lender liability for environmental damages caused by borrowers in most cases. The focus remains on the direct polluter (the borrower) for both wrongdoing and remediation costs.
• Regulations emphasise the need for environmental due diligence and responsible lending practices, encouraging lenders to consider environmental risks in their lending decisions.
To mitigate potential risks, lenders are advised to:
• Conduct thorough environmental due diligence for projects with significant environmental impacts.
• Include environmental compliance clauses in lending agreements.
• Monitor borrowers’ compliance with environmental laws and regulations throughout the loan period.
In summary, while Indonesian Law primarily targets direct polluters for environmental liability, lenders could face indirect liability under certain conditions, particularly when they exert significant control over the borrower’s operations or take possession of contaminated property. Implementing robust environmental risk assessment and management practices is key for lenders to mitigate potential liabilities.
5 Contaminated Land
5.1 What is the approach to liability for contamination (including historic contamination) of soil or groundwater?
In Indonesia, the approach to liability for contamination, including historic contamination of soil or groundwater, is governed by the principle of “polluter pays” as established under the Environmental Protection and Management Law No. 32 of 2009. This principle holds that those who produce pollution are responsible for managing pollution and mitigating its impacts, including the costs associated with cleanup and remediation of contaminated sites.
Key aspects of liability for contamination:
(a) Strict liability: For businesses engaged in activities known to be hazardous and pose significant risks to the environment, Indonesian law applies a strict liability principle. This means that the responsible parties are liable for environmental damage caused by their activities, regardless of fault or negligence.
(b) Historic contamination: Liability for historic contamination generally falls on the current owner or operator of the contaminated land. However, if it can be proven that the contamination was caused by a previous owner or operator, liability may be transferred to them. The challenge often lies in establishing a clear causal link between past activities and current contamination.
(c) Remediation obligations: The law requires that any party responsible for causing soil or groundwater contamination must undertake necessary remediation measures to restore the environment. This includes both immediate actions to stop ongoing contamination and long-term efforts to clean up affected areas.
(d) Government role: The Indonesian Ministry of Environment and Forestry, along with local environmental agencies, plays a critical role in overseeing compliance with environmental laws, including the investigation of contaminated sites and enforcement of remediation measures. They have the authority to mandate cleanup actions and impose sanctions on non-compliant parties.
(e) Legal proceedings: Affected parties, including communities and individuals, can bring legal actions against polluters for damages and to compel cleanup of contaminated soil or groundwater. Environmental NGOs and community groups often play a crucial role in highlighting cases of contamination and advocating for remediation.
5.2 How is liability allocated where more than one person is responsible for the contamination?
The allocation of liability for environmental contamination in Indonesia, when involving multiple responsible parties, is guided by the principles of joint and several liability and proportionality, as outlined in the Indonesian Environmental Law. These principles ensure that environmental damage is addressed and remediated while also providing a basis for the fair distribution of costs among those responsible.
5.3 If a programme of environmental remediation is “agreed” with an environmental regulator, can the regulator come back and require additional works or can a third party challenge the agreement?
In Indonesia, when an environmental remediation programme is agreed upon with an environmental regulator, such as the Ministry of Environment and Forestry or local environmental authorities, the possibility for the regulator to require additional works or for a third party to challenge the agreement does exist. While an environmental remediation agreement with a regulator represents a commitment to address specific environmental issues, both the regulator and third parties have rights under Indonesian law to seek additional works or challenge the adequacy of the remediation efforts. This ensures that environmental remediation is responsive to evolving understandings of environmental harm and remains aligned with the overarching goals of environmental protection and sustainability as mandated by the Indonesian Environmental Law.
5.4 Does a person have a private right of action to seek contribution from a previous owner or occupier of contaminated land when that owner caused, in whole or in part, contamination, and to what extent is it possible for a polluter to transfer the risk of contaminated land liability to a purchaser?
The Indonesian Environmental Law provides the legal framework for addressing environmental contamination and assigns liability for such contamination. While the law primarily focuses on the polluter pays principle and the responsibility of current landowners or operators to address contamination, the possibility of seeking contribution from a previous owner or occupier for causing contamination is implicit in the broader principles of environmental liability and remediation responsibilities outlined in the law.
Regarding the transfer of risk of contaminated land liability to a purchaser, the Indonesian Environmental Law does not explicitly address the transfer of environmental liability in the sale of contaminated land. However, the principle that environmental permits (and implicitly, the responsibilities attached to them) are attached to the land and its operation means that a new owner could inherit environmental liabilities associated with the land.
5.5 Does the government have authority to obtain from a polluter, monetary damages for aesthetic harms to public assets, e.g. rivers?
Yes, the Indonesian government has the authority under the Indonesian Environmental Law to obtain monetary damages from polluters for aesthetic harms to public assets, such as rivers. This law encompasses a broad definition of environmental damage that can include not only direct physical harm to ecosystems and human health but also degradation of aesthetic and cultural values associated with environmental assets.
6 Powers of Regulators
6.1 What powers do environmental regulators have to require production of documents, take samples, conduct site inspections, interview employees, etc.?
Yes, environmental regulators in Indonesia have the authority to require the production of documents, especially from parties applying for environmental approvals. This is a crucial aspect of the regulatory oversight to ensure compliance with the environmental standards set forth in Indonesian law.
According to Article 74 of the Indonesian Environmental Law, environmental regulators are empowered with several significant authorities to supervise and control the environmental laws application effectively. These powers include:
(a) Taking samples: Regulators can collect samples from various environmental media such as air, water, soil, or waste materials at facilities or sites under investigation. This is essential for assessing compliance with environmental quality standards and detecting pollution.
(b) Conducting site inspections: The law authorises regulators to perform inspections of any premises, facilities, or sites that are suspected of violating environmental laws or to ensure compliance with the conditions of environmental permits. These inspections can be scheduled or conducted without prior notice to effectively monitor and evaluate environmental practices.
(c) Asking for information (interviewing employees): As part of their investigative and monitoring duties, environmental regulators have the authority to request information from businesses or individuals. This includes interviewing employees, managers, or other relevant personnel to gather insights into operational processes, compliance measures, and potential environmental impacts associated with their activities.
7 Reporting / Disclosure Obligations
7.1 If pollution is found on a site, or discovered to be migrating off-site, must it be disclosed to an environmental regulator or potentially affected third parties?
Implicitly, Indonesian environmental law mandates the reporting of pollution incidents to the environmental regulator and necessitates the provision of warning information to the community about environmental pollution and/or damage. This dual obligation ensures a comprehensive approach to pollution management, emphasising both regulatory oversight and community engagement to safeguard environmental health and public welfare.
7.2 When and under what circumstances does a person have an affirmative obligation to investigate land for contamination?
In Indonesia, under the Indonesian Environmental Law, there are specific circumstances under which a person, typically a landowner or business operator, has an affirmative obligation to investigate land for contamination. The law outlines the framework for environmental management and protection, emphasising the responsibilities of those engaged in activities that could impact the environment.
Circumstances requiring investigation of land for contamination:
(a) Prior to environmental permit issuance: Individuals or companies applying for an environmental permit (AMDAL or UKL-UPL documentation) for new projects or expansions are required to conduct environmental impact assessments. This may include investigating potential land contamination to assess the environmental baseline conditions and potential impacts of the proposed activity.
(b) In the event of a suspected pollution incident: If there is reason to believe that land may be contaminated due to past or present activities, such as industrial operations, waste disposal, or accidental spills, the responsible party is obligated to conduct an investigation to ascertain the extent of contamination.
(c) Compliance with specific regulatory requirements: Certain industries and activities identified as having a high environmental risk are subject to ongoing environmental monitoring and assessment requirements, which may include periodic investigations of land for contamination.
(d) Upon Regulatory or Court Order: Environmental regulators or courts may order an investigation of land for contamination in response to complaints, reports of environmental harm, or as part of enforcement actions against non-compliance with environmental laws.
7.3 To what extent is it necessary to disclose environmental problems, e.g. by a seller to a prospective purchaser in the context of merger and/or takeover transactions?
In merger and acquisition transactions in Indonesia, the disclosure of environmental problems by a seller to a prospective purchaser is necessary to ensure legal compliance, manage risks, and maintain transparency. It is integral to the due diligence process, aiding the accurate valuation of the target company and the negotiation of terms that appropriately reflect environmental liabilities and responsibilities.
8 General
8.1 Is it possible to use an environmental indemnity to limit exposure for actual or potential environment-related liabilities, and does making a payment to another person under an indemnity in respect of a matter (e.g. remediation) discharge the indemnifier’s potential liability for that matter?
In Indonesia, the use of environmental indemnities within contracts, including those for mergers, acquisitions, property transactions, and other business agreements, is a recognised practice to manage and allocate risks associated with actual or potential environmental liabilities. An environmental indemnity is a contractual mechanism whereby one party (the indemnifier) agrees to protect another party (the indemnitee) from losses arising from environmental conditions or violations.
Parties must be aware that indemnity agreements do not alter their legal obligations under environmental laws. Regulatory authorities may still pursue legal action against the original polluter or current owner/operator of a contaminated site for remediation, regardless of any indemnity arrangement.
8.2 Is it possible to shelter environmental liabilities off balance sheet, and can a company be dissolved in order to escape environmental liabilities?
In the context of Indonesian law, the practices of sheltering environmental liabilities off balance sheet and dissolving a company to escape environmental liabilities are subject to strict legal and regulatory scrutiny. Indonesian environmental and corporate laws establish clear responsibilities for environmental damage and pollution that aim to prevent such avoidance tactics.
The Indonesian Environmental Law applies the principle of strict liability for environmental damage, which holds companies and their directors personally accountable for environmental harm caused by their operations. This liability extends beyond the dissolution of the company, meaning that the responsible parties cannot simply avoid their environmental obligations through dissolution.
8.3 Can a person who holds shares in a company be held liable for breaches of environmental law and/or pollution caused by the company, and can a parent company be sued in its national court for pollution caused by a foreign subsidiary/affiliate?
In the context of Indonesian corporate and environmental law, the liability of shareholders for breaches of environmental law or pollution caused by the company is generally limited. The principle of limited liability that underpins the corporate structure in Indonesia means that shareholders are not normally held personally liable for the debts or legal obligations of the corporation, including environmental liabilities. This principle is established by Law No. 40 of 2007 on Limited Liability Company (the “Company Law”) as lastly amended by GR in lieu of Law No. 2 of 2022 on Job Creation (“Job Creation Law Amending the Company Law”), which delineates the separation between the company as a legal entity and its shareholders.
Shareholders’ liability is typically limited to the value of their investment in the company. However, there are exceptional circumstances under which shareholders, particularly those who have significant control over the company or are actively involved in the management, could potentially be held liable for environmental breaches if it can be proven that their actions or negligence directly contributed to the environmental harm.
The question of whether a parent company can be sued in its national court for pollution caused by a foreign subsidiary or affiliate is complex and intersects with principles of international law, corporate law, and the specific details of environmental legislation. Under Indonesian law, the direct liability of a parent company for the actions of its subsidiaries is not explicitly detailed in the context of environmental harm. However, global legal trends and certain international cases have seen parent companies being held accountable for the environmental damages caused by their subsidiaries, especially if the parent company had significant control over the operations or failed to ensure compliance with environmental standards.
8.4 Are there any laws to protect “whistle-blowers” who report environmental violations/matters?
In Indonesia, the protection of whistleblowers, including those who report environmental violations, is recognized under several legal frameworks, though it is not as comprehensive or specifically tailored to environmental issues as in some other jurisdictions. The protection for whistleblowers primarily comes from general legislation that covers the reporting of criminal acts and corruption, which can include environmental crimes under certain circumstances, among others:
(a) Law No. 13 of 2006 on Witness and Victim Protection: While this law primarily focuses on witnesses and victims within the criminal justice system, it provides a basis for the protection of individuals who come forward with information about illegal activities, including environmental violations. This law allows individuals reporting violations to request protection to ensure their safety and confidentiality.
(b) Law No. 31 of 1999 as amended by Law No. 20 of 2001 on Corruption Eradication: This law, while specifically targeting corruption, has been applied in cases where corruption intersects with environmental violations, such as illegal logging facilitated by bribes. Whistleblowers reporting corruption that leads to environmental harm can seek protection under this framework.
8.5 Are group or “class” actions available for pursuing environmental claims, and are penal or exemplary damages available?
The Indonesian Environmental Law explicitly facilitates group or “class” actions for pursuing environmental claims, highlighting the legal system’s acknowledgment of the collective nature of environmental harm and the necessity for a communal response. Article 91 of this Indonesian Environmental Law provides a structured approach for communities or groups affected by environmental damage or pollution to collectively seek legal remedy. This legal provision is crucial in offering a clear path for affected parties to file lawsuits against those responsible for environmental harm, emphasising shared facts, legal grounds, and claim types as the basis for such actions.
The utilisation of group actions in Indonesia has been a pivotal method for addressing significant environmental issues, including pollution, deforestation, and various forms of environmental degradation. These collective legal efforts often involve communities or NGOs acting on behalf of affected populations. This approach not only amplifies the voices of those impacted by environmental harm but also enhances the effectiveness of legal actions aimed at securing environmental justice and remediation.
While Article 1365 of the Indonesian Civil Code recognises the concept of immaterial damages for indirect losses resulting from legal violations, the legal system traditionally emphasises compensatory damages aimed at remedying the harm suffered by the claimants.
Moreover, Article 87 paragraph (3) of the Indonesian Environmental Law introduces the concept of “dwangsom” or coercive fines, which courts can impose for delays in executing environmental violation-related court decisions. This mechanism serves to enforce compliance and facilitate timely remediation, acting as a deterrent against environmental obligation non-compliance.
8.6 Do individuals or public interest groups benefit from any exemption from liability to pay costs when pursuing environmental litigation?
While Indonesian law does not explicitly provide an exemption from liability to pay costs for individuals or public interest groups pursuing environmental litigation, there are various mechanisms and considerations that can alleviate the financial burden associated with such litigation. Legal aid, pro bono services, and the potential for court discretion in awarding costs offer support for public interest environmental litigation. The emphasis is on ensuring access to justice for environmental protection, encouraging active public participation and the enforcement of environmental laws.
9 Climate Change and Emissions Trading
9.1 What is the overall policy approach to climate change regulation in your jurisdiction?
Indonesia’s approach to climate change regulation encompasses a broad strategy aimed at mitigating greenhouse gas emissions and adapting to climate impacts. The framework is underpinned by national policies and international commitments:
a) National Action Plan for Greenhouse Gas Emission Reduction (RAN-GRK), as per Presidential Regulation No. 61 of 2011, updated by Presidential Regulation No. 71 of 2011, sets out emission reduction targets across key sectors.
b) Nationally Determined Contribution (“NDC”) aligns with the Paris Agreement, targeting a 29% emission reduction by 2030 from a business-as-usual scenario, extendable to 41% with international support.
c) Environmental Protection and Management Law No. 32 of 2009 establishes a legal foundation for environmental sustainability, including climate-related measures.
d) National Energy Policy (“KEN”), Presidential Regulation No. 22 of 2017, aims for a 23% renewable energy share by 2025 to lower the energy sector’s emissions.
e) Peatland and Forest Conservation initiatives, including a moratorium on new exploitation licences, are crucial for carbon storage and emission reductions.
Despite a comprehensive policy framework, Indonesia faces challenges in implementation, enforcement, and the mobilization of necessary investments in sustainable practices. Achieving Indonesia’s climate goals will require enhanced governance, sectoral coordination, and both national and international collaboration.
9.2 What is the experience of climate change litigation in your jurisdiction?
The experience of climate change litigation in Indonesia, while still developing, has begun to reflect a growing consciousness among the public and a readiness to engage the legal system for climate change issues and environmental protection. This shift is partly driven by efforts to hold both Government and private sectors accountable for actions contributing to climate change or for failing to comply with environmental protections.
Notable climate change litigation cases:
(a) Citizens Lawsuit versus the Government for Air Pollution: A landmark case involved citizens suing the government over air pollution in Jakarta, asserting that governmental inaction breached their constitutional rights to a healthy environment. In 2021, the Central Jakarta District Court ruled in the plaintiffs’ favour, marking a significant advancement for environmental activism in Indonesia.
(b) Legal Challenges Against Deforestation: Environmental groups and communities have initiated lawsuits against corporations for illegal deforestation and land use changes that exacerbate climate change. These actions focus on enforcing environmental permits and laws aimed at conserving forests and peatlands.
(c) Samarinda Coal Mining Case: In a pivotal lawsuit (55/Pdt.G/2013/PN.Smda, 138/PDT/2015/PT.SMR, 490K/Pdt/2018), plaintiffs sued the Mayor of Samarinda, alleging they were victims of climate change due to the Mayor’s failure to properly oversee coal mining permits. The courts recognised the climate change impacts, such as floods and landslides, attributing them to excessive mining permits as negligence causing harm to the plaintiffs. The lawsuit was partially granted, with instructions for the Mayor to revise coal mining policies. This case introduced climate change arguments into the Indonesian legal discourse, although the cassation court later annulled the decisions due to procedural issues.
9.3 What emissions trading schemes are in operation in your jurisdiction and how is the emissions trading market developing?
Indonesia is in the early phases of implementing an emission trading scheme, primarily guided by Presidential Regulation Number 98 of 2021 on the Implementation of Carbon Economic Value for Achieving Nationally Determined Contribution Targets and Greenhouse Gas Emission Control in National Development (“PR 98/2021”). This regulation sets the framework for carbon pricing, including emissions trading, aimed at reducing greenhouse gas emissions in line with Indonesia’s climate targets.
The emissions trading market is evolving, with efforts focused on establishing the necessary infrastructure, guidelines, and systems for reporting and verification. The Indonesian Environmental Law and Government Regulation No. 46 of 2017 on the Environmental Economic Instruments (“GR 46/2017”) support the use of economic instruments such as the emission trading scheme for sustainable environmental management.
Additionally, the Law Number 7 of 2021 on Tax Harmonization (“Tax Harmonzation Law”) indirectly impacts the emission trading scheme by potentially offering tax incentives for investments in environmentally sustainable practices and technologies, which could influence participation in the emissions trading market.
The future development of Indonesia’s emissions trading system (“ETS”) market depends on several factors, including the detailed implementation of existing regulations, the introduction of sector-specific guidelines, and the integration of ETS with international carbon markets. Continuous engagement with industry stakeholders, clear regulatory guidance, and effective monitoring and enforcement mechanisms are crucial for the growth and success of the emissions trading market in Indonesia.
In conclusion, while Indonesia’s ETS is still in its early stages, the country is making significant strides towards establishing a comprehensive and operational emissions trading scheme. The success of these efforts will be instrumental in Indonesia’s transition to a low-carbon economy and its ability to meet its climate commitments.
9.4 Aside from the emissions trading schemes mentioned in question 9.3 above, is there any other requirement to monitor and report greenhouse gas emissions?
Indonesia has established requirements for monitoring and reporting greenhouse gas (“GHG”) emissions beyond the emissions trading schemes. These requirements are anchored in the Indonesian Environmental Law and further detailed through regulations issued by the Ministry of Environment and Forestry.
Key regulations include:
(a) Minister of Environment and Forestry Regulation No. P.14/MENLHK/SETJEN/KUM.1/3/2017, focusing on GHG emissions monitoring and reporting in the forestry sector.
(b) PR 98/2021, which establishes a framework for the national inventory of GHG emissions, requiring comprehensive reporting from various sectors.
These regulations are part of Indonesia’s commitment to its Nationally Determined Contribution (“NDC”) under the Paris Agreement, aiming to reduce GHG emissions by 29% by 2030 against a business-as-usual scenario, or up to 41% with international support. Compliance with these monitoring and reporting requirements is critical for achieving Indonesia’s climate targets and for the global effort to mitigate climate change.
10 Asbestos
10.1 What is the experience of asbestos litigation in your jurisdiction?
It is important to note that asbestos litigation, as commonly understood in jurisdictions like the United States or Australia, is not as prevalent in Indonesia. The legal framework and public awareness regarding the health risks associated with asbestos exposure are evolving, and the country is still in the process of addressing these issues through regulation and litigation.
10.2 What are the duties of owners/occupiers of premises in relation to asbestos on-site?
Government Regulation No. 22 of 2021 (GR 22/2021) mandates reductions in hazardous waste production, including asbestos. Efforts should be made to replace asbestos with less harmful materials, reflecting its classification as a hazardous substance.
Government Regulation No. 27 of 2020 assigns the management of specific hazardous wastes, such as asbestos from households, to regional governments. Owners of premises with significant asbestos must adhere to environmental approvals issued by these authorities.
11 Environmental Insurance Liabilities
11.1 What types of environmental insurance are available in the market, and how big a role does environmental risks insurance play in your jurisdiction?
To the best of our knowledge, there are several types of environmental insurances:
(a) Environmental liability insurance: Covers legal liabilities for environmental damage, including pollution cleanup and third-party claims.
(b) Pollution legal liability insurance: Focuses on liabilities from pollution incidents, covering cleanup costs and third-party claims for injuries or damage.
(c) Contractors pollution liability insurance: Provides coverage for pollution incidents caused by construction activities.
(d) Site-specific environmental impairment liability insurance: Protects against liabilities and cleanup costs for pollution or contamination at specific sites.
Environmental insurance is gaining importance in Indonesia, driven by:
(a) Regulatory compliance: Businesses seek coverage to navigate stricter environmental regulations and potential liabilities.
(b) Corporate responsibility: Firms use environmental insurance to underscore their commitment to sustainable and responsible practices.
(c) Financial protection: It safeguards businesses against the costs associated with environmental incidents.
(d) Investor confidence: Insurance coverage signals a proactive stance on environmental risk management.
11.2 What is the environmental insurance claims experience in your jurisdiction?
Indonesia’s environmental insurance market is in its early stages, with limited public data on claims. The overall experience with environmental insurance claims is evolving.
Awareness and uptake of environmental insurance are increasing among businesses, particularly in high-risk industries such as manufacturing, mining, and energy. However, claims experience remains relatively limited.
12 Updates
12.1 Please provide, in no more than 300 words, a summary of any new cases, trends and developments in environment law in your jurisdiction.
Over recent years, there has been a notable shift towards more stringent environmental protection and regulation, reflecting both local and global sustainability goals.
One landmark case is the 2019 ruling by the Central Jakarta District Court on air pollution in Jakarta. The court recognised the Government’s failure to provide clean air as a violation of citizens’ rights, setting a significant precedent for future environmental litigation. This case underscores the judiciary’s increasing willingness to hold public and private entities accountable for environmental harm.
A major trend is the growing emphasis on corporate environmental responsibility. Indonesian companies are increasingly adopting sustainable practices, driven by regulatory pressures and a growing awareness among consumers and investors about environmental issues. This trend is supported by the introduction of stricter environmental regulations and the Government’s push for compliance.
Significant regulatory developments include the enactment of Government Regulation No. 22 of 2021 on Environmental Protection and Management, which introduces more comprehensive measures for waste management and pollution control. Additionally, the government has been active in updating its NDCs under the Paris Agreement, committing to more ambitious climate targets.
Another development is the increasing role of environmental insurance as a tool for managing environmental risks, reflecting a more sophisticated approach to environmental risk management among Indonesian businesses.
Indonesia is experiencing a dynamic shift in environmental law, marked by significant legal rulings, a stronger emphasis on corporate environmental responsibility, and the introduction of more stringent regulations. These changes signal Indonesia’s commitment to addressing environmental challenges and aligning with global sustainability efforts.
This article was prepared by Yuliana Pertiwi Siagian and Gesiu Nicholas Manurung from NP Consultant Law Firm and has been published by Global Legal Group in The International Comparative Legal Guide - Environment & Climate Change Law 2024, Indonesia Chapter. You can read the full article here: https://iclg.com/practice-areas/environment-and-climate-change-laws-and-regulations/indonesia.
Please note that this article does not constitute legal advice, and NP Consultant will not be responsible for any reliance on the information provided herein.