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Insights Decision 91: Omnibus Law declared "conditionally unconstitutional"

Decision 91: Omnibus Law declared "conditionally unconstitutional"

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The Law No. 11 of 2020 on Job Creation (“Job Creation Law”) – also commonly referred to as the “Omnibus Law” – has been subject to a judicial review by the Constitutional Court of the Republic of Indonesia (Mahkamah Konstitusi or “MK”) since late 2020. Through the decision No. 91/PUU-XVIII/2020 (“Decision 91”), dated 25 November 2021, MK has declared the Job Creation Law to be “conditionally unconstitutional”, which means the enactment of the Job Creation Law was not fully compliant with the constitution of the Republic of Indonesia (the “Constitution”) and therefore needs to be rectified.
 
In its consideration for the Decision 91, MK holds the view that the omnibus format (ie. issuing one law to amend several existing laws) adopted by the Job Creation Law is inconsistent with the prevailing law on the formation of laws and regulations, as such law does not recognize the omnibus format. The fact that there are substantial differences between the bill (draft) of the Job Creation Law and the enacted law also contributes to the imposition of the “conditionally unconstitutional” status to the Job Creation Law under the Decision 91.

 

In light of the above, the Decision 91 renders the following:

  1. to declare that the formation of the Job Creation Law contradicts with the Constitution and will have no legal binding power if it is not rectified within the period of two (2) years as of the date of the Decision 91;
  2. to declare that the Job Creation Law shall remain valid until the above rectification is made within the period of two (2) years;
  3. to order the lawmakers to rectify the Job Creation Law within 2 (two) years, as otherwise the Job Creation Law shall become permanently unconstitutional;
  4. to declare that, in the event the rectifications were not made within the prescribed timeline, any and all articles or provisions of laws revoked or amended by the Job Creation Law will be reinstated; and
  5. to declare the suspension of all strategic and broad-impact actions/policies, and to restrict the issuance of new implementing regulations in relation to the Job Creation Law.
    Government Position

 

Whilst many academics view the Decision 91 as ambiguous and inconclusive, the Indonesian Government seems to have taken a stand that the Job Creation Law along with all of its implementing regulations will remain valid while the revisions as mandated by the Decision 91 are underway – a view that has been expressed by many public officials, ministers and even the President of the Republic of Indonesia himself on many occasions.

 

The Indonesian Government expressed its willingness to honor the Decision 91 and will expedite the revisions of the Job Creation Law in the beginning of 2022. The Minister of Investment/Chairman of Investment Coordinating Board further assures that there will be no disruption to investments caused by Decision 91.

 

Our Conclusion on the decision and its impact on investments in the country

Despite the comforting position of the Indonesian Government, the Decision 91 may still give rise to practical risks, as to date the implementation of the Job Creation Law remains a work-in-progress. Since there are some technical implementing regulations that still need to be issued by the ministries in charge as a result of the enactment of the Job Creation Law, the restriction to issue new implementing regulations imposed by Decision 91 might lead to the current uncertainty caused by the absence of relevant technical implementing regulations to persist, which may also catalyze disruptions in the licensing process.

   
The Indonesian Government has made a significant step into the right direction opening the country more for foreign investments. Current and future investors are concerned that the decision at hand might put their investment at jeopardy. The Government has already announced to address the decision in due course, and it can be expected that this is handled with priority to reduce concerns at hand. Following the intention to further open the country to foreign investors, it can be expected that the executive, legislative, and judicial bodies are working together to solve concerns related to the enacted laws.

  
Rödl & Partner will continue to closely monitor the situation and provide updates on the status on a regular basis.

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