Indonesia’s Criminal Procedure Code (“KUHAP”) was last revised in 1981. Many are of the view that it has not kept up with legal developments since then and that it is in need of substantial amendments. In the past month, there have been two major developments, namely the promulgation of a new Supreme Court Regulation relating to corporate prosecutions and a significant Constitutional Court decision relating to the supervision of criminal investigations.
While powers to investigate and prosecute corporations have been significantly expanded, investigators will also be subject to closer supervision.
One area where the expansion of investigative and prosecutorial powers may have a significant impact is in the anti-corruption sphere. The Indonesian Corruption Eradication Commission (“KPK”) said last year that it intended to pursue private sector actors for their corrupt activities. Regulation 13/2016 on Procedures for Handling of Corporate Crime Cases (“Regulation 13/2016”) now provides guidance to the KPK on investigating and prosecuting corporations for the corrupt activity of persons they have an employment or other relationship with. The changes also bring Indonesian rules closer in line with corporate liability regimes such as the UK Bribery Act. It will also guide enforcement agencies in investigating and prosecuting other corporate crimes.
Investigators given more power to investigate and prosecute corporations
Over 70 statutes in Indonesia provide for corporate criminal liability but there have been very few corporate prosecutions. Regulation 13/2016 was promulgated following discussions between the Supreme Court and law enforcers such as the Attorney General’s Office, the KPK, and the Indonesian Police. Regulation 13/2016 provides clarity regarding the rules and procedures that will apply in a corporate prosecution, in particular:
- Corporate liability may exist if a criminal act is committed by any person who, whether based on an employment relationship or other relationship, acts (whether alone or with others) for and on behalf of the company within or outside of the company’s business environment. This is a very wide scope which increases the likelihood of criminal liability being attached to companies;
- In determining whether a corporation should be held criminally liable, judges shall consider the following three non-exhaustive factors:
- whether the corporation might receive a profit or benefit from the criminal act or if the criminal act was committed in furtherance of the corporation’s interest. Again, this increases the likelihood of criminal liability being attached to corporations because it indicates that actual profit or benefit is not required;
- whether the corporation allowed the criminal act to be performed; or
- whether the corporation failed to take the requisite steps to prevent the criminal act, to limit the impact of the criminal act, or to put processes in place to ensure compliance with prevailing laws and regulations.
- Corporate liability may also be imposed on a parent company, subsidiary, or related company if it is involved in the criminal act.
Regulation 13/2016 also sets out guidelines regarding the investigation and prosecution of companies. These address the loophole in the KUHAP whereby corporations were not recognised subjects of the criminal law. In particular, there are new rules on:
- how a company can be summoned for investigation and who can represent the company. The KUHAP does not provide details, which has created difficulties for investigators wishing to investigate a company;
- the format of an indictment letter to be served on a company under the KUHAP. The KUHAP prescribes the format of an indictment letter to be served on an individual, with some requirements (e.g. religion) that are not applicable to companies. As a result, investigators and prosecutors have in the past been reluctant to investigate and prosecute companies for criminal acts because they took the view that indictment letters served on companies should follow the same format as prescribed under the KUHAP, which was unworkable in the case of companies;
- the admissibility of information provided by a member of the company’s management as valid evidence. There was previously debate as to whether such information was admissible under the KUHAP;
- the right of victims (e.g. victims of an environmental crime) to seek compensation or other remedies from the company;
- seizure and sale of assets that were used to perform a criminal act and/or that were obtained as a result of a criminal act. The KPK has stated that in the majority of corruption cases, corporations continue to enjoy the fruits of their corrupt activities. The new provisions will assist the KPK to achieve one of its primary objectives which is to recover “state loss” that occurred as a result of a corporation’s corrupt conduct;
- the ability to bring a civil claim against a dissolved corporation’s former management or other third parties who are in possession of the dissolved corporation’s assets which are suspected to have been used to carry out a criminal act and/or obtained as a result of a criminal act. It is not clear whether this only reiterates existing rights of action (in which case such a claim can only be brought in corruption cases) or is meant to allow civil claims in case of other crimes committed by corporate actors.
Regulation 13/2016 has been welcomed by law enforcement agencies including the KPK and it is anticipated that the frequency of corporate prosecutions will increase. Companies operating in Indonesia should ensure that they have the appropriate internal policies and procedures in place to prevent the carrying out of criminal acts such as bribery on their behalf. It is likely that the type of policies and processes that the Indonesian authorities will expect to see will not be dissimilar to the prevention measures that multi-national companies were required to implement when the UK Bribery Act came into force in July 2011.
Investigators subject to closer supervision
On 11 January 2017, the Constitutional Court rendered Decision No. 130/PUU-XIII/2015 (“Decision 130”), which will require investigators (including the Indonesian Police) to now serve a letter (“SPDP”) on the prosecutor, the reporting party, and the reported party notifying the commencement of a criminal investigation within seven days after the issuance of the investigation warrant.
Article 109(1) of the KUHAP provided only that investigators should serve the SPDP on the prosecutor and did not establish a deadline for doing so. This resulted in weak or inadequate supervision of investigations by public prosecutors. Before Decision 130, it was not uncommon for investigators to notify the prosecutor of the commencement of a criminal investigation only at the last minute when the case dossier was nearly or fully completed. Many believe that this was intended to limit the involvement of public prosecutors in investigations.
Decision 130 was issued in response to submissions made by several human rights activists who took the view that the situation described above had created legal uncertainty and resulted in inadequate checks and balances. The Constitutional Court agreed with the submissions, ruling that the SPDP should be served within 7 days of the commencement of an investigation and confirming that, in addition to the prosecutor, both the reporting and reported parties have a right to receive the SPDP.
In practice, the service of the SPDP on all parties involved paves the way for the reporting and reported parties to request the prosecutor to exercise closer supervision over the investigation process. It is possible that the new rule will reduce the number of spurious criminal investigations initiated by disgruntled commercial parties as a tactic to gain leverage in relation to the settlement of disputes. The new rule will also mean parties subject to investigation will be forewarned and better able to prepare their defence.