Indonesia Constitutional Court declares Omnibus Law “conditionally unconstitutional”

Hogan Lovells

Hogan Lovells

[co-author: Zuhal Saputra]

On 25 November 2021, just one year after the Government of Indonesia passed Law No. 11 of 2020 on Job Creation (the Omnibus Law), the Constitutional Court issued decision no. 91/PUU-XVIII/2020, ruling that the Job Creation Law is “conditionally unconstitutional”.

The Omnibus Law and its implementing regulations remain in effect until 25 November 2023, however, unless the government successfully revisits and amends the procedural flaws in the Omnibus Law, the Omnibus Law will be deemed unconstitutional.

We anticipate that the government will ramp up efforts to uphold the Omnibus Law through amendments to legislation and regulations. Businesses are advised to ensure their interests are represented by active engagement in the government’s public.

The Constitutional Court’s Decision No. 91/PUU-XVIII/2020 is the first court decision to decide a judicial review petition based on procedural, rather than substantive, grounds. The Indonesian Constitutional Court has the power to review whether a law issued through collaboration between the government as executive and the House of Representatives is in compliance with the Indonesian Constitution. It may also declare a law entirely or partially unconstitutional, as well as determining the ways a part of a law should be interpreted to comply with the Indonesian Constitution. The Constitutional Court is a separate and independent court at the same level as the Supreme Court, together with which it holds judiciary powers.

A group of petitioners including a former labourer, a student, an academic, a group representing the Indonesian diaspora, and a representative of the indigenous community, submitted the judicial review petition to the court on 15 October 2020. It was received before the Omnibus Law was formally promulgated on 2 November 2020, but after the House of Representatives passed the bill on 5 October 2020. Between those dates, there had been many circulating drafts of the bill, contributing to uncertainty following the COVID-19 pandemic.

In a 5-4 decision the court ruled that the Omnibus Law is “conditionally unconstitutional”. In the meantime, the government is not allowed to issue implementing regulations of the Omnibus Law and must ensure that issues of procedural flaws in the Omnibus Law can be addressed.

The Constitutional Court’s decision is not without controversy; it has ordered the government to suspend any “strategic” or “broad-impact actions/policies”, a decision deemed beyond the remit of the court under the Indonesian Constitution. And since there is no avenue to appeal against a Constitutional Court decision, the court’s decision is final and binding.

What’s next?

Until the government can address the Constitutional Court decision, the Omnibus Law and its implementing regulations continue to be in force.

One of the key goals of the Omnibus Law is to significantly increase investment in Indonesia and job opportunities for its abundant workforce. To avoid reneging on these aims, the government will need to address the Constitutional Court’s decision with a round of significant law reform. Until then, the government needs a statutory basis for establishment of an Omnibus-style law and ensure public participation in law-making.

Attention should be paid to potential changes as well as taking the opportunity to take an active role in providing inputs to the government during the public consultation period. Businesses which have sector or industry-specific concerns can address their questions to our specialized professionals, including the authors of this update.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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