April 26, 2011

Waiving Article 1266 and Article 1267 Indonesia Civil Code

Most of agreements in Indonesia stipulate the waiver of Article 1266 and 1267 Civil Code because in the event of default or non-fulfillment of agreements by one of Parties, then:

a. The parties do not have to obtain the Court approval in order to terminate the Agreement. The termination of agreement can be conducted with the mutual consent of those parties.(Art.1266)

b. The party can enforce other Parties to fulfill its obligation or can demand the termination of the said agreement to the Court with compensation of cost, losses and interest (Art.1267)

Excerpt:

Article 1266 The termination requirement always deemed that is stipulated in the reciprocal agreement, if one party does not fulfill its obligation. In such case, the agreement isn’t null and void, but termination must be requested to the Court. The said request shall be conducted, although the termination requirement on non-performance obligations stipulated in the agreement.

If the termination requirement isn’t stipulated in the agreement, then the Judge reviews the conditions, based on the request of the defendant; freely provide a certain period to fulfill obligations, but that certain period cannot be longer than a month.

Article 1267 Party that his/her agreement was not fulfilled, can decide, to force other Parties to fulfill the agreement, if it still can be conducted, or demanded the termination of agreement, with compensation of cost, losses and interest.

The legal implication of waiving these articles is that the termination of agreement cannot return the first stage, but only terminate the agreement.

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September 14, 2010

Which Institutions of the UN System are available for environmental Dispute Settlement?

Introduction

Each member state that enters to the international environmental agreement must acknowledge the provisions of dispute settlement. The United Nations (“UN”) system provides various options on dispute settlement such as but not limited to negotiation, enquiry, mediation, conciliation, arbitration, and judicial settlement (refer to Article 33 (1) of UN Charter).

Negotiation consists of a proposal made by one or the other parties to a dispute and the reaction of the other party, including counterproposals, in order to reach agreement. The independent body must establish the facts of a determined case on process of enquiry. Mediation consists in brining the disputing parties together and submitting to them concrete proposals for the settlement of the dispute. [1]

Judicial settlement generally means a decision by the International Court of Justice (ICJ), the main judicial organ of the UN (Article 92 UN Charter). Decisions of the ICJ are always obligatory and must be executed. Although the decisions have no binding force, its scientific and moral authority are general considered to express customary international law.[2] Moreover, the UN Charter also gives parties the freedom to choose the dispute settlement by virtue of agreements in existence or which may be concluded in the future (Article 95 UN Charter).

The followings are the UN institutions that are available under UN System:

General Assembly

The United Nations General Assembly is one of the principal organs of UN. The General Assembly has authorities not only to oversee the budget of UN but also make recommendations in the form of General Assembly Resolution.

Any member of the UN may bring any dispute or situation of the nature, which leads to international friction or could give rise to a dispute that is likely to endanger the maintenance of international peace and security, to the attention of the General Assembly (refer to Article 35 of Article 34 UN Charter). The resolutions of the General assembly have no legal binding but they serve as a building block of soft law related to the environment.

International Court Justice

As mentioned before, the ICJ is the principal judicial organ of United Nations[3] and may give an advisory opinion on legal questions.[4] The ICJ has ruled on issues related to the environment in different realms. In 1996, it made a ruling on nuclear weapons[5] and also issued judgment on the management of transnational natural resources in the 1997 Danube Dam Case. While the decision of the ICJ has no binding force the judgment is final and can not be appealed. The role of ICJ in environmental issues has grown over the years and is recognized as customary international law.

Secretary General

The Secretary General has role as a depository of treaties (refer to Article 102). It also has the right to bring to the attention of the Security of Council any matter which in its opinion may threaten the maintenance of international peace and security (refer to Art. 99 UN Charter).

The Secretary General may render a legal opinion. This was done in 1993 at the Conference of the Parties (“COP”) for United Nations Framework Convention on Climate Change (UNFCCC), where the Secretary General issued a legal opinion that stated that the UNFCCC has the legal capacity within the limits of its mandate, to enter into agreements and other arrangements with entities such as states, intergovernmental and non-governmental organizations and bodies, which also have to the authority to do so. The Global Environmental Facility (“GEF”) on the other hand which was established under World Bank, does not have the legal capacity to enter on its own into agreement. If the COP wishes to use the present GEF as an operating entity, it would have entered into an agreement or an arrangement with the World Bank as the parent organization.[6]

With regard to its role on environmental issues, the Secretary General can also act as a conciliator which was done in the Rainbow Warrior Affair case in July 1986.[7]

Security Council

Security Council is one of the principal of organs of UN whose role is to maintain international peace and security. The Security Council under UN Charter has power to investigate any situation threatening international peace, recommend procedures for peaceful resolution of a dispute[8] and enforce through military action.[9] Its power is exercised through United Nations Security Council Resolutions.

Under UN Security Council Resolution 687 in 1991, the Security Council stipulated terms Iraq had to comply with after losing the Gulf War. The Resolutions stated that all chemical, nuclear and biological weapons as well as all ballistic missiles must be destroyed in order to establish the Middle East a zone free from weapons of mass destruction (refer to Paragraph 14 United Nations Security Council Resolution 687, April 3, 1991).[10] This Resolution also required Iraq to honors all its international debts and pay war reparations to Kuwait.

The Resolutions of the Security Council are legally binding to the members of United Nations according to Chapter V of UN Charter regarding the Security Council and Chapter VII of UN Charter regarding Action with Respect to Threats to the Peace, Breaches of the Peace and Acts of Aggression.

World Bank

The World Bank has a significant role on environmental issues. It prepares the operational policies for development projects, including projects related to environmental and natural resources management. It also follows up on the decisions of the Independent Inspection Panel as well as conducts the national capacity building, including environmental legislation.[11]

The World Bank established the World Bank Panel Inspection in 1994 to respond to requests from citizens of Nepal who claimed that their rights and interests had been or were likely to be materially and adversely affected by the acts or omissions of the International Development Association during the design and appraisal of proposed IDA Project “Arun III”[12] (refer to Nepal: Arun III Proposed Hydroelectric Project and Restructuring of IDA Credit 2029-NEP case). Further the management response to the Inspection Panel’s investigation report was issued on August 2, 1995 that the Management supported the Inspection Panel’s report. [13]

World Trade Organization (“WTO”)

The ministerial Decision on Trade and Environment, adopted in Marrakesh in 1994, called for the establishment of a Committee on Trade and Environment (“CTE”). The CTE took over from the GATT EMIT (“GATT Group on Environmental Measures and International Trade”).[14]

The WTO system is conceivably the strongest inter-State judicial dispute settlement mechanism in existence, which seeks to be an effective guardian of the rules based system that underpins the WTO.[15] The WTO Understanding on Rules and Procedures Governing the Settlement Dispute (“DSU”) provides the basis dispute settlement under WTO such as establishment of a panel[16] and the appellate body[17].

Although this system is not without imperfections, it stands in sharp contrast to dispute settlement mechanisms in International Environmental Agreements, which tend not to be used. It is precisely because of the power of the WTO dispute settlement system, and its potential to impact directly on the economic interests of disputants, and thereby a country’s overall policy landscape, that the environmental community has particularly scrutinized developments in the WTO Dispute Settlement Body.[18]

The Dispute Settlement Body of WTO has a significant role on environmental issues by enforcing trade restrictions. For example, unsustainable fishing practices were discouraged after the WTO ruled in 1994 [19] that European countries could ban the import of shrimp and tuna that recklessly killed turtles and dolphins.[20]

Conclusions

The United Nations system provides a numbers of avenues for members to mediate conflicts related to the environment. As discussed, these legal avenues take many different forms and give the system an overall flexibility that allows for complex environmental issues to be resolved. The system also establishes customary law over time with the creation of UN resolutions and legal opinions. These resolutions are often the first step in establishing new environmental treaties. While most international law is hard to enforce, UN security resolutions and WTO rulings give these decisions teeth as they threaten of the use of military force or economic sanctions. However the moral and political authority of the UN serves as the foundation of international customary environmental law.

Bibliography

Alexandre KISS, Introduction to International Environmental Law, 2nd edition, UNITAR, Geneva 2005.

Peter H.SAND, The Role of International Organizations in the Evolution of Environmental Law, UNITAR, Geneva 1997.

Richard TARASOFSKY, Report on Trade, Environment, and the WTO Dispute Settlement Mechanism, http://www.cat.e.org, (June 2005).

Charter of the United Nations, http://www.un.org/en/documents/charter/intro.shtml.

Statute of International Court of Justice, http://www.icjcij.org/documents/index.php?p1=4&p2=2&p3=0

Understanding of Rules and Procedures Governing the Settlement Disputes (DSU) WT/DS2/6, http://www.wto.org/English/docs_e/legal_e/28-dsu.pdf.

World Trade Organizations, http://www.wto.org

Nations Security Council Resolution 687, http://www.fas.org/news/un/iraq/sres/sres0687.htm

[1]Alexandre KISS, Introduction to International Environmental Law, 2nd edition, UNITAR, Geneva 2005, p 63-64

[2] Ibid, p. 64.

[3] Charter of United Nations, Article 92 and Statute of International Court of Justice, Article 1.

[4] Charter of  United Nations, Article 96.

[5] Legality of Nuclear Weapons-International Court of Justice, advisory opinions to WHO and UNGA, The Hague 1996 cited in Sand, 1997.

[6] Peter H.SAND, The Role of International Organizations in the Evolution of Environmental Law, UNITAR, Geneva 1997, p.68.

[7] Conciliation Pertaining to the Differences between France and New Zealand Arising from the Rainbow Warrior Affair, 1986 cited in Sand, 1997.

[8] Under Chapter Six of Charter of United Nations, ”Pacific Settlement of Dispute.”

[9] Under Chapter Seven of United Nations Charter.

[10] Nations Security Council Resolution 687, April 3, 1991, http://www.fas.org/news/un/iraq/sres/sres0687.htm

[11] Peter H.SAND, The Role of International Organizations in the Evolution of Environmental Law, UNITAR, Geneva 1997, p.23

[12] Ibid, p.95

[13] Ibid, p. 101

[14] World Trade Organizations, http://www.wto.org

[15] Richard TARASOFSKY, Report on Trade, Environment, and the WTO Dispute Settlement Mechanism, http://www.cat.e.org, (June 2005).

[16] Understanding of Rules and Procedures Governing the Settlement Disputes (DSU) WT/DS2/6, Article 6, http:www.wto.org/English/docs_e/legal_e/28-dsu.pdf.

[17] Ibid, Article 16.

[18] Richard TARASOFSKY, Report on Trade, Environment, and the WTO Dispute Settlement Mechanism, http://www.cat.e.org, (June 2005).

[19] Ibid.

[20] Ibid.

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August 26, 2010

The Compliance with International Environmental Law – Indonesia

INTRODUCTION

Environmental degradation is a global concern. Pollution in one country can have negative impacts on another. Therefore, international cooperation is imperative to dealing with environmental problems. One way in which the world community addresses environmental problems is through the development of international environmental conventions. These conventions are the foundation of international environmental law. While signing a treaty shows a country’s commitment to the goals of the convention, it does not always mean that the treaty will be ratified and made into law or even that it will be enforced.  Indonesia, a country that has signed number of international environmental conventions, will serve as a case study, to highlight challenges and obstacles countries face in terms of complying with international environmental law.

Signing an environmental convention is the first step in the process. Presidents and diplomats may have the power to sign treaties but in most democratic countries, international treaties must be ratified by parliament. This concept, known as a two level game in international policy, can often prevent treaties from being ratified if domestic support for the goals of the treaty is low. A classic example of this was when Bill Clinton signed the Kyoto Protocol. Despite the US being a signatory of the Protocol, its legislative body never ratified the treaty. Indonesia is similar in this sense in that it has failed to ratify all of the conventions of which it has become a signatory member. One of the reasons it has failed to ratify all of the convention is the perceived urgency of that Convention for Indonesia. If the pertinent Convention is expected to have a big impact on society, the Government will work to ratify immediately. Conventions thought to be of lesser importance are often side lined in order to deal with more pressing domestic policy initiatives causing significant time to lapse before an international environmental convention will be ratified. The Stockholm Convention, for example, was signed on May 23, 2001 but was not ratified by Indonesia until July 9, 2009, when Law No.19 of 2009 regarding the Ratification of Stockholm Convention on Persistent Organic Pollutants, was passed. Delayed ratification or failure to ratify a convention is the first of many obstacles governments face in complying with international environmental law.

The ratification process for international agreements in Indonesia is similar to that of many other democratic countries. Ratification can take place through the approval of the President or the House of Representative or Parliament (“Dewan Perwakilan Rakyat or DPR”).[1] After signing the international agreement(s) or convention(s), the Government of Indonesia needs to ratify them. The basis of law regarding ratification of international agreements in Indonesia is Article 11 (1) and (2) of the Constitution (“Undang-undang Dasar 1945 or UUD’45”) and Law No.24 of 2000 regarding International Agreement (October 23, 2000) (“Law on International Agreements”). Indonesia has classified the ratification of international agreement(s) into two categories: Laws issued by the President is in the form of a Presidential Decision (“Keputusan Presiden or KEPPRES”) or laws issued by Parliament (“Undang-Undang or UU”). The Law on International Agreements further states that International Agreements can be ratified through either Laws or Presidential Decisions. However the law specifically states that Environmental International Agreements require the approval of Parliament. Before the Law on International Agreements was issued on 2000, those environmental agreements could be ratified in the form of President Decision or Laws based on the important and less important. For example: Conventions on the Laws of Sea, some of them are in the form of Laws, the others are in the form of the President Decisions.

DISCUSSIONS

By ratifying International Environmental Agreements, Indonesia communicates to the international community that it is committed to sound environmental management and that it has the similar values and goals. Furthermore, ratification signals that domestic policy for the protection of natural resources in Indonesia exists. However the compliance of international environmental law is often complicated in the developing world as countries seek to obtain the highest level of economic development forcing them to compromise on environmental protection and because responsible government organizations often lack the resources necessary to effectively implement the convention.

  1. 1. Increase the Compliance of International Environmental Law

Specialists of international relations insist on the importance of negotiation for ensuring compliance with treaties. The negotiations have the best chance to successful when they are based on elements, which already exist in national law or international conventions like 1972 Stockholm Conference, the 1992 Rio Conference.[2] This is based on the fact that if the convention is based on existing laws, necessary infrastructure such as government ministries are already set up allowing for the monitoring and enforcement of certain laws. If new law or new government departments need to be established in order to comply with international treaties, then compliance with the convention will be delayed and may take many years before it will be effective.

Institutional support at the international level is also critical in terms of compliance at the domestic level. This support can take the form of a well-trained secretariat and regular conferences of the parties. [3] Convention on Wetlands of International Importance especially as Waterfowl Habitat (“Ramsar Convention”) is an example of how conventions require continued participation from countries in order to ensure continued compliance. Ramsar Convention requires the establishment of “a Conference of the Contracting Parties to review and promote the implementation of this Convention. The Bureau shall convene ordinary meetings of the Conference of the Contracting Parties at intervals of not mare than three years, unless the Conference decides otherwise, and extraordinary meeting at the written request of at least two third of the Contracting Parties. Each ordinary meeting of the Conference of the Contracting Parties shall determine the time and venue of the next ordinary meeting (refer to Article 6 Ramsar Convention).”

Each Party must present their report of the implementation of the Ramsar Convention in the Conference of Parties (“CoP”). Parties must also protect wetland areas. As a result, the Indonesian Government designated two Ramsar Sites: The National Park of Berbak (1992) and National Park of Sentarum (1994) (refer to Article 4 of the Ramsar Convention).

Article 4 of the Ramsar Convention:

“Each Contracting Party has to promote the conversation of the wetlands and waterfowl by establishing nature reserves on wetlands, whether they are included in the list or not, and provide adequately for their wardening.”

Pursuant to the 9th Meeting of Conference of the Contracting Parties to the Ramsar Convention in Kampala, Uganda, the world community recommended that Indonesia designate the new Ramsar site because of Indonesia’s role as the country with the biggest wetlands in the Asia-Pacific region.[4]

  1. 2. The Obstacles for the Application of Environmental Law

Economic Reasons: Domestic Economic Policy goals can hamper compliance of international environmental law as competing forces in the government may be at odds with environmental protection. Powerful economic lobbies in a country may also obtain special dispensations as a way of attracting economic development to depressed areas. In Indonesia, palm-oil is a major industry. Last year, large scale producers pumped out 18.4 million tons in 2008, with exports of 14 millions tons.[5] Several local regions in Indonesia have actively sought to attract foreign investment to further develop palm-oil industries. The palm-oil plantations are established on peat forestland which is a biological diverse type of wetlands. This policy initiative goes directly against the goals of Ramsar. While other countries, the EU in particular, seek to curb the creation of more palm oil plantations on important wetland forests by setting strict standards for palm oil cultivation by prohibiting the development of plantations on forestlands. This requirement will be hard to meet for Indonesian producers as the bulk of the country’s oil palm plantation stand of cleared forestland.[6] While Environmental Ministry officials say that new plantations will not be established on cleared forests, economic ministry officials and regional politicians often express different opinions on the matter. On the other side, Indonesia has taken a strong stance against bomb fishing as it was destroying important coral reefs. These reefs, seen as an import driver of tourism revenue, have become protected through public private partnerships such as the coral triangle initiative. In this sense, the government is following the international convention because it is in line with economic development.

Implementing certain conventions can also have negative impacts on the economy. The farming industry in Indonesia, like all countries, relies heavily on pesticides. Before the Government ratified the Stockholm Convention, the Government only prohibited the use of aldrin, DDT, endrin, heptachlor, mirex, toxaphene, hezachlor benzene as well as PBC pursuant to the Government Regulation No.74 of 2001. It wasn’t until July 9, 2009 that the Government ratified this Convention and prohibited all dangerous production of the 12 listed Persistent Organic Pollutants (“POPs”). It took eight years for all of the POP’s to be banned since a viable alternative to some of the POPs were not available at a commercial level which would allow small scale farmers to earn a living.

It is clear that economic considerations play a large role in not only determining which environmental conventions get ratified but also impact the manner in which they are enforced at the domestic level.

Insufficient knowledge of domestic capabilities for implementation of the International Environment Agreements: The Government sometimes does not understand international environmental rules sufficiently making implementation difficult. Capacity building can help resolving this problem.[7] For example, the Government still has not managed the Ramsar sites effectively based on the Ramsar Guidelines. The CoP of Ramsar Convention suggested Indonesia needs to review the management of Ramsar Sites. In order to build capacity of domestic organizations, the Government needs to work together with international environmental organizations. To give an example, the Indonesian Ministry of Forestry works together with Wetlands International on various projects such as surveying potential conservation sites, wetlands rehabilitation, public awareness and policy – institutional strengthening.[8] Capacity building takes time but it is crucial in terms of ensuring long term compliance with international environmental law.

CONCLUSIONS

International environmental law often represents an idealistic scenario which countries operate in a sustainable manner. Developed countries often dominate the decision making process and ask developing countries to make sacrifices in terms of economic development. Often heads of states or diplomatic envoys sign international environmental conventions as a way of showing that they are committed to international collective decision making on environmental protection. However it is clear that these countries often lack domestic support for these conventions. This is clear based on the fact that it takes many years for treaties to be ratified while some are never made into law. Ratification doesn’t ensure compliance. Economic forces in a country often take a higher role with environmental protection relegated to an after thought. Even willing countries in the developing with domestic support for a convention often lack the resources and effective ministries to implement the policy.

[1] Section 3 Law No.24 of 2000 regarding the International Agreement (October 23, 2000), http://www.bpkp.go.id

[2] Alexandre KISS, Introduction to International Environmental Law, 2nd edition, UNITAR, Geneva 2005, p.57

[3] Alexandre KISS, Introduction to International Environmental Law, 2nd edition, UNITAR, Geneva 2005, p.58.

[4] The Report of 9th Meeting of Conference of the Contracting Parties to the Ramsar Convention on Wetlands in Kampala, Uganda http://www.dephut.go.id/INFORMASI/PHPA/PHKA/Ramsar.htm

[5] Dian ARIFFAHMI, Palm Oil Producers Want Indonesia’s Support on Tough EU Biofuel Regulation, September 13, 2009, http://thejakartaglobe.com/business/palm-oil-producers-want-indonesias-support-on-tough-eu-biofuel-regulation/329698

[6] Ibid.

[7] Alender Kiss pg 57

[8] http://www.wetlands.or.id/profile.php

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April 15, 2010

The New Draft of Negative List of Investment in Indonesia

I attended briefing meetings of the new draft of Negative List of Investment in Indonesia couple weeks ago. Mr. Gita Wirjawan, the Head of Coordinating Investment Body of Indonesia (“Badan Koordinasi Penanaman Modal or BKPM”)  gave insight overview on the said draft. He stated that the new negative list of investment will be issued soon.

The new draft of Presidential Regulation on Negative List comprises of some provisions of Presidential Regulation No.77/2007 and No.111/2007 that are still deemed relevant and new articles.

This regulation clearly stipulates that Negative List is not applied to indirect investment or portfolio investment through a transaction made in the domestic stock exchange.

Further, the Grandfather clause will come into force for mergers and acquisition in the same business fields. This new regulation will not apply to any investment that was approved by the Government prior to the stipulation of this regulation. The exemption is when the new provision is more beneficial for the pertinent investor.

The expansion of business in the same business fields with different location is not required to establish a new business entity or obtain new business permit, except it stipulated specifically by the Law. This provision should make it easier for investor to expand their business activity in the same business field.

This regulation stipulates a new provision on rights issues and treasury stocks. Business expansion in the same business fields which require additional capital through the issuance of new shares (right issues):

(1) Foreign investor has pre-emptive rights since domestic partner cannot participate in the capital increment.

(2) In the event the foreign capital exceeding the limitation of foreign capital in its Approval Letter (“BKPM Approval”) , within 2 years of the limitation must be adjusted back down to the required maximum foreign ownership as mentioned on the Approval Letter, through finding another domestic investors, selling the shares through domestic stock market, and buying back the excess shares as treasury stock pursuant to Article 37 Company Law.

Excerpt Article 37 Company Law:

Article 37 Repurchase of Shares

(1) Limitations‎ A Company may repurchase the shares which have been issued, provided that: a. the share repurchase does not render the Company’s net assets less than the capital subscribed for and the statutory reserve that have been allocated; and‎ b. the total nominal value of all shares repurchased by the Company or the fiduciary encumbrance of shares held by the Company itself and/or other Company which shares directly or indirectly are owned by the Company shall not exceed 10% (ten percents) of the capital subscribed for the Company, unless provided otherwise by the prevailing laws and regulations in the area of capital market.‎

(2) Void by Law‎ A repurchase of shares, directly or indirectly, which is in contrary to the stipulation in paragraph (1) is void by law.

(3) Directors’ Liability‎ The Board of Directors are jointly and severally liable for all losses suffered by the shareholders who acted in good faith, which is caused by the lawful nullification of the share repurchase as referred to in paragraph (2). (4) Three Years Maximum‎ Shares repurchased by the Company as referred to in paragraph (1) may be held by the Company only for a maximum of three (3) years.

This regulation will supersede both President Regulation No.77/2007 and No.111/2007.

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March 26, 2010

New Regulation on Import License in Indonesia

Ministry of Trade issued a new regulation on the Import License (Ministry of Trade No.45/M-DAG/PER/9/2009 which came into effect on January 11, 2010. The Company that holds the Limited Import License or APIT-U must conduct adjustment to this regulation within one (1) year after this law came into effect. With APIT-U, the Company can import goods for the production purposes and import goods for distribution purposes. Now, the Company cannot conduct importation for both purposes. The Company must choose either holds General Import License (“API-U”) or the Producer Import License (“API-P”). The Company that conducts importation of goods for trading or distribution activities must obtain API-U. On other hands, the Company that conducts importation of goods for its own production process must obtain API-P. Under this regulation, the Company may only have one type of import license.

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