Indonesia

Borderless Opportunity: Indonesia Launches Golden Visa On Thursday 25th of July 2024, Indonesian Ministry of Law and Human Rights (“MoLHR”) officially launch as well as introduces its latest immigration product named Golden Visa which took place in South Jakarta. The issuance of Golden Visa is purposefully aimed to invite potential talented individuals across the globe to invest and later contribute to the nation’s rapidly growing economy. Indonesian Minister of Law and Human Rights, Mr. Yasona Laoly, provide the following statement: “These days, Border between states has almost become borderless marked by an intense mobilization of individuals as well as the movement of international citizens resulting to the enormous growth of Indonesia in various sectors. In line with the rapid dynamism of Globalization, an adaptive and responsive regulations are required so that we can optimize all resources and potentials for the prosperity of Indonesia. Hence, we decided to conclude the issuance of Golden Visa” . The statement above is further reaffirmed by the Director General of Immigration of the Republic of Indonesia, Silmy Karim, stipulating that the Golden Visa is essential due to the increasingly interconnected world. Golden Visa is a swift response to the need for strategic initiative to elevate Indonesia global standing. It serves several main objectives which include attracting more foreign investment, driving digital innovation, as well as nurturing the nation’s human capital. Based on Article 184 of the Regulation of the Minister of Law and Human Rights No.22 of 2023 concerning Visas and Limited Stay Permits, as amended by Ministry of Law and Human Rights No.11 of 2024 concerning Amendments to Regulation of the Minister of Law and Human Rights No.11 of 2023 concerning Visas and Limited Stay Permits (together referred to as, "Permenkumham 22/2023"), the Golden Visa is a grouping of limited Stay Visas, Limited Stay Permits, Permanent Stay Permits, and Re-Entry Permits for a certain period of time. In this case, a Golden Visa is granted to carry out activities. Indonesia’s Golden Visa offers residency to foreign nationals in a period ranging from 5 to 10 years with extension. It requires investment capital ranging from the minimum of 0,35 to 50 million USD at maximum for individuals as well as 25 million to 50 million USD for Companies. Moreover, it comes with 9 visa classifications each provides specific benefits for foreign nationals. To apply for a Golden Visa, all it takes is to access the website of evisa.imigrasi.go.id and follow the instructions provided. With this latest product, Indonesia’s hopes of emerging as well as growing strongly in the world globalism continues to soar. As the Golden Visa’s are now becoming more and more accessible to foreign nationals, it is expected to provide significant stimulation towards nation’s developing economy as well as releasing country’s truest potential in the global stage. Strongly evident from the successful practices of 22 preceding countries issuing Golden Visa, the chances of making Indonesia on par with other world’s economic Giants has never been more feasible than ever.  

Updates to Indonesia’s Franchise Regulatory Landscape - An Overview Very recently, the Indonesian Government issued and enacted Government Regulation No. 35 of 2024 regarding Franchises (“GR 35/2024”). GR 35/2024 replaces the previous regulation governing the matter i.e., Government Regulation No. 42 of 2007. Key provisions under GR 35/2024 Criteria Criteria of business that can be considered as a Franchise: Possesses a business system in a form a written operational standard and procedure that is easy to be applied and include a clear framework; The business has generated profits which is proven by showcasing that the business has been franchised for at least 3 years consecutively and the business’s audited financial statements for the past 2 years have been reflecting profits; Possesses registered intellectual property rights e.g., trademarks, copyrights, patent, trade secret etc; and There is a continuous support from the franchisor to the franchisee such as training, operational management, promotion, research, market development and other form of support. For completeness, GR 35/2024 sets out the following definition: Franchise is the special rights possessed by individual or legal entity on a business system which criteria was set in order to market any goods and/or services which was proven as successful and can be leveraged and/or utilized by other party based on the Franchise agreement. Franchise agreement is a written agreement between the franchisor and franchisee which contain the granting of the rights to enjoy the economic benefit of a Franchise for a certain period of time. Offering of the Franchise The franchisor must deliver an offering prospectus to the prospective franchisee at the latest 14 calendar days before signing of the franchise agreement. The franchise offering prospectus must, at least, include the following details and must be in Bahasa Indonesia: Identity of the franchisor; Legality of the franchisor; Business history; Organisational structure of the franchisor; Business system; Financial statements of the past 2 years; Number of franchise outlets save for the franchisor who has just started to offer the franchise arrangement; List of the franchisee. Rights and obligations of the franchisor and franchisee; and Certificate or registration statement of the intellectual property rights involved. Franchise Agreement GR 35/2024 specifically governs that the prevailing law of the franchise agreement must be Indonesian law, and the minimum contents are prescribed. Interestingly, one of the contents of the franchise agreement prescribed by GR 35/2024 is a guarantee from the franchisor to the franchisee for the franchisee to obtain a compensation and/or to receive its rights in case of cease of the franchise business by the franchisor. Obligations of the Franchisor One of the key obligations of the franchisor under GR 35/2024 is to provide a continuous support to the franchisee. The continuous support could be in a form of promotion through advertisement, exhibition, or brochure. In addition to the support, the franchisor is also obliged to divide the distribution area among franchisees. These provisions indicate that GR 35/2024 wishes to ensure that the franchisor remains responsible to support the franchisee to achieve success with the franchise business, and that GR 35/2024 is not in favor of franchise arrangement where the franchisor is merely accepting as much as franchisee as possible. Obligations of the Franchisee On the other hand, one of the key obligations of the franchisee imposed by GR 35/2024 is to safeguard the ethic code/confidentiality of the intellectual property rights owned by the franchisor. Local content GR 35/2024 remains consistent with the intention of the Indonesian Government to ensure a minimum use of local content within the goods and/or services offering in franchise arrangements. The obligation to meet the local content requirement is imposed to both franchisor and franchisee, although in the case of franchisee the fulfillment of the obligation subjects to whether the use of local content meets the standard of quality prescribed by the franchisor. The minimum percentage of local content is determined by the relevant regulations. Franchise Registration Letter The franchisor and the franchisee (respectively) must obtain the franchise registration letter in order to carry out its business and the letter must be obtained prior to entering into any franchise agreement. The franchise registration letter of the franchisor is deemed invalid when: The franchisor ceases its business activity; and/or The term of the registered intellectual property rights expires. On the other hand, the franchise registration letter of the franchisee is deemed invalid when: The term of the franchise agreement expires or terminated; The franchisor or the franchisee ceases its business activity; and/or The term of the registered intellectual property rights involved in the franchise arrangement expires. Sanctions for Non-Compliance to Key Obligations Obligations Party(ies) Affected Sanctions Remarks To provide continuous support Franchisor Administrative sanctions ranging from written warning, temporary suspension of business activities, and/or revocation of franchise registration letter. As mentioned above, GR 35/2024 is clearly showcasing its position against any franchise arrangement where the franchisor is merely accepting as much as franchisee as possible. To obtain the franchise registration letter prior to the commencement of the business or entering into the franchise agreement Franchisor and/or franchisee Sanctions as per the regulations governing the risk-based business licensing, which range from written warning to revocation of license. - In case of franchise arrangement involving offshore franchise business to amend the franchise registration letter in case of changes in the franchise prospectus offering and franchise agreement. Franchisor and/or franchisee Administrative sanctions ranging from written warning, temporary suspension of business activities, and/or revocation of franchise registration letter. GR 35/2024 appears to not differentiate any treatment for franchise arrangements, either involving domestic or offshore franchise business.   Grandfather Clause All franchise registration letters issued before GR 35/2024 is grandfathered from any updates made by GR 35/2024. The franchise registration letters that are currently in progress are not grandfathered and therefore updates could be applied to the review process of these registration letters. Subsequent Franchisor and Subsequent Franchisee All obligations and references to franchisor and franchisee apply to subsequent franchisor and subsequent franchisee. To read the article in PDF version,  click here.

Clients’ Alert – Preparing for Labor Law Changes in Indonesia Overview of the Indonesian Constitutional Court Ruling No.168/PUUXXI/2023 issued on 31 October 2024 (the “Ruling”) On 31 October 2024, the Constitutional Court finally deliver its final ruling on the pleads for judicial review of the Law No. 11 of 2020 on Job Creation Law – this ruling was delivered after almost a year of series of proceedings since the first plea was submitted. The plea was submitted by several labor unions in Indonesia on the basis that the Job Creation Law (which significantly amended the landscape of Labor Laws in Indonesia) does not align with the principles of Indonesia 1945 constitution. We set out below the impactful part of the Ruling and our recommended pro-active action to mitigate the potential changes in the future. Labor rights   The Ruling envisages the importance of employer to, at all times, meet the general labor rights of employees. These rights cover the matters such as proportionality principle in determining wages, day offs for employees, and the general right of employees to have decent living. The Ruling prescribes that the minimum wage determination should be a cross stakeholders product in the sense of both regional wage councils and representative of local governments should work together to conclude the appropriate minimum wage for employees. Recommended action: businesses in Indonesia to start reviewing the existing hiring framework and how the wage was calculated. Determining the ‘proportionality’ and establishing ‘fair pay’ practice could be a struggle for businesses knowing the significance of subjective dependency, hence there could be a need of engaging a data-driven consultant to assist the businesses in setting up their view of what could be deemed as ‘proportionate’. Hiring prioritise set for Indonesian talents  It has been a longstanding rule in Indonesia that employers must prioritise the hire of Indonesian talents before seeking for expatriates/non Indonesian talents. To date, the importance of this requirement remains dependent on individual/organisational. The Ruling clarifies that businesses are required to favor Indonesian hires over foreign nationals especially for roles that do not require specific skills that cannot be undertaken by Indonesian. Recommended action: businesses to consider reviewing its hiring strategies and investing in local talent development to eventually support the localisation goals. This could be in a form of mentoring, or sharing knowledge between foreign hires and Indonesian hires. Limitation on fixed-term employment arrangement   The Ruling emphasizes that any fixed-term employment, regardless of the purpose, must be limited to a 5 year term including any extensions. In addition to the limited term, the Ruling also prescribes that the fixed-term employment agreement must be in Bahasa Indonesia. It is clear that the Constitutional Court attempts to ensure transparency in employment terms hence safeguarding the interest of employers and employees. Recommended action: Businesses to consider performing audits of its existing employment contract to understand the prevailing language, and how it was drafted. It is expected that any dispute raising from unclear drafting or language misunderstanding would be ruled in favor of the employees in light of the Ruling. Additionally, human resources policy/framework may need to be revisited to understand the impact of converting fixed-term employees to permanent positions, and to revamp the process of doing so. Clearer rights in case of termination and dispute resolution   Termination processes have been the most complex matters to navigate – regional labor government could have a different interpretation, the employees have their own expectation, and employers would want to limit any form of indemnity for the employees as minimum as possible. The Ruling is now mandating all terminations to be accompanied with a clear justification and it must be done through a formal procedures with sufficient notice to the employee. The Ruling also introduces the possibility of mandated reinstatement if the termination is not justifiable or no clear processes in place. For completeness, the Ruling also touches briefly on an expectation to implement more efficient dispute resolution between employers and employees. Recommended action: businesses to look into revamping its termination process including but not limited to ensure termination policies are well-documented, and align with the mandates of the Ruling. It would also be important to train the human resource teams to handle terminations fairly and the importance of thorough documentation.   The Ruling also pushes for the urgency to separate the labor laws from the Job Creation Law that was essentially enacted as an omnibus law. It is mandated that all judiciary authorities and governmental authorities to support the implementation of the Ruling including but not limited to produce the necessary regulatory products. Indonesia Centre of Indonesian Labor Union (Gabungan Serikat Buruh Indonesia) voiced out its gratitude for the ruling of the Constitutional Court. For the organisation, the ruling may bring in a more balanced state between keeping business interests in engaging employees while giving clarity to the employee position. Bearing in mind wide range of stakeholders who are looking after the Ruling and its impacts, we foresee changes to Indonesian labor laws to be formalised at the soonest and could be leaving businesses little to no time to adapt.   To read the article in PDF version,  click here

Disclaimer: The following is not legal advice but rather educational content. Non-reliance should be assumed. Non-Disclosure Agreement For In-Housel Counsel: Clauses Watch List Article 1320 of the Indonesian Civil Code ("Kitab Undang-Undang Hukum Perdata" or "KUHPer") stands as a fundamental provision governing the formation of valid contracts in Indonesia. Contract review and negotiation is a day-to-day activity of in-house counsel (and legal practitioners). The main goal of contract review and negotiation is not only to close the deal or formalise business relationship, but also to avoid future risks e.g., misinterpretation of the parties’ intention. In short, making sure the contract is valid under Article 1320 of Indonesian Civil Law is not enough. A non-disclosure agreement (“NDA”) is one of the regular contracts reviewed by in-house counsel as NDA is commonly serving the role as the first document being signed by the parties before discussing the potential deal any further. It is not uncommon for NDA to be the object of a dispute between the parties – in our experience, in most cases, unclear drafting which (unintentionally) allows various interpretations is the breeding ground for disagreements and disputes. We set out below a watch list of clauses that should be considered by in-house counsel when reviewing and negotiating NDA. As a refresher, at the end of the article, we provide a high-level overview of Article 1320 and the challenges in practice. Definition of confidential information  Ensure the definition of confidential information is precise and comprehensive, covering all types of data the disclosing party intends to protect, including trade secrets, rights attached to the information disclosed, business plans, and proprietary technologies. Clear scope of confidentiality obligation Clarify the scope of the confidentiality obligation to include not only keeping the information but also to include prohibition to reverse engineer the information and/or reproduce for commercial purposes or otherwise. It is also key to clarify the extent of safe-keeping obligation, for example, impose the requirement of destroying the information when the NDA is deemed terminated. Applicability of the confidentiality obligation In global business, it is important for the obligation to keep the confidentiality obligation to apply not only to the recipient of the confidential information, but also the affiliates, advisors, or related party(ies) of the recipient. Without clear drafting of the applicability of the confidentiality obligation, it could be challenging for the parties to enforce the NDA provisions in the future. For completeness, it would be pivotal to clearly define “affiliates” or “related parties” or any other relevant term. Exclusions from confidentiality  Pay attention to any exclusions, such as information already in the public domain or independently developed by the recipient without breaching the NDA. These exclusions must be narrowly defined to avoid loopholes. Term  Review the duration of the confidentiality obligations. While the agreement itself may have a fixed term, confidentiality obligations often extend beyond its termination and this should be clarified within the drafting. As a rule of thumb, no party should be subjected to perpetual obligation (e.g., confidentiality obligation) or agreement as this would expose such party to potential risks of breach. No transfer and no disruption to the intellectual property rights of the confidential information It is common for confidential information to have intellectual property rights attached to it – hence it is key to spell out the restrictions of challenging the intellectual property rights of the confidential information. Any sharing of confidential information should not imply transfer of the ownership of the information or the intellectual property rights attached to it. This should be clearly stated in the NDA to avoid any misunderstanding between the parties. Warranty of no reliance  As the common purpose of NDA is to further discuss a potential commercial deal, it is very important for the NDA to limit any liability that might arise from any commercial decisions made in reliance on the confidential information disclosed between the discloser and the recipient.   High-level overview of Article 1320 of Indonesian Civil Law Article 1320 prescribes four essential conditions for a contract to be valid: Consensus (Kesepakatan) The first requirement mandates mutual consent between the contracting parties. Consent must be free from coercion, fraud, or mistake ("dwaling"), as stipulated under Article 1321. Any taint to the purity of consent could render a contract voidable or even void. Capacity to Contract (Kecakapan untuk Berbuat) Parties must possess the legal capacity to enter into binding agreements. Under Indonesian law, capacity is often tied to age (e.g., adulthood at 18 years) and mental competence. Corporate entities must also act through duly authorized representatives, emphasizing the importance of power of attorney ("surat kuasa") and corporate resolutions. A Specific Object (Suatu Hal Tertentu) The agreement must pertain to a specific and determinable object. This ensures the subject matter of the contract is clearly identified, whether it involves goods, services, or other obligations. A Lawful Cause (Suatu Sebab yang Halal) The contract’s purpose must not contravene public order, morality, or statutory provisions. Contracts involving prohibited activities, such as usury or illegal trade, are deemed null and void.   Challenges in Practice Despite its clarity, Article 1320 can present challenges in practice. The subjective nature of "consent" and "lawful cause" often leads to judicial interpretation. Courts frequently scrutinize whether parties truly reached a meeting of the minds or whether external factors, such as coercion or misrepresentation, tainted the agreement. Legal practitioners must be meticulous in documenting negotiations and ensuring transparency in contractual terms to withstand potential disputes. The dynamic nature of business practices also tests the limits of "lawful cause." Innovations in technology, cross-border transactions, and regulatory changes may inadvertently lead to contracts that are later deemed unlawful. For instance, agreements involving emerging industries, such as fintech or blockchain, often require careful vetting against applicable laws to avoid future invalidation. Moreover, the principle of "good faith" (itikad baik) increasingly influences judicial interpretations. Courts may evaluate the behavior of parties throughout the contractual process, adding another layer of complexity to compliance and enforceability. To read the article in PDF version,  click here