Indonesia's Corruption Eradication Commission (KPK) has named a corporate suspect, publicly listed PT Duta Graha Indah (DGI), concerning alleged corruption in the construction of a state university hospital in Bali in 2010. This is a first for the KPK, acting on broad powers conferred last year through a Supreme Court Regulation on Procedures for the Handling of Corporate Crime Cases (Regulation 13/2016).
In a jurisdiction where inbound investment and corruption risk are both high, this is a significant development which both domestic corporates and MNCs operating in Indonesia should take on board. Companies 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.
The KPK's enforcement activity has increased rapidly since its establishment in 2003. However, as a result of laws which focus on public sector bribery and enforcement which has until recently focused almost exclusively on public sector bribe recipients, there have been limited prosecutions of private sector bribe givers. Regulation 13/2016 makes it easier to attribute corporate liability in cases where an employee or agent acting on behalf of a company commits an act of bribery. It is likely that we will see an uptick in enforcement against corporates as part of the KPK's shift in focus to private sector bribe-givers, and in light of their first use of Regulation 13/2016 to pursue a corporate.
Corporate liability may exist if a criminal act is committed by any person who, whether in an employment relationship or other relationship, acts (alone or with others) for and on behalf of the company within or outside of the company’s business environment. This is broadly drafted and its scope is as yet untested by the courts. In determining whether a corporate should be held criminally liable, judges should consider the following non-exhaustive factors:
- whether the corporate might receive a profit or benefit from the criminal act or if the criminal act was committed in furtherance of the corporate’s interest. This increases the likelihood of criminal liability attaching to corporates because actual profit or benefit is not required;
- whether the corporate allowed the criminal act to be performed; or
- whether the corporate 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 addresses past procedural hurdles in bringing criminal proceedings against companies (eg by introducing rules on how a company may be summoned and who may represent a company in criminal proceedings).
The investigation and prosecution of DGI will be watched with interest as something of a test case. It will help set the parameters of the corporate offence, as well as potentially test the extent to which state losses can be recovered against corporates.