Shipping 2019 Comparisons

Last Updated April 03, 2019

Law and Practice

Authors



Budidjaja International Lawyers has substantial experience in providing advice and solutions to clients doing business in the Indonesian shipping sector. It has represented clients in a wide range of disputes, including contracts, groundings, unlawful arrests, bunker disputes, cargo loss, ship collisions and oil pollution incidents. Foreign law firms regularly engage Budidjaja International Lawyers to provide them with expert advice and opinions on Indonesian shipping law. The firm is also well known for regularly representing clients in all aspects of restructurings and bankruptcy, including out-of-court restructurings, and where appropriate it advises on and represents client through litigation and insolvency procedures. Its clients include local and multinational banks, financial institutions and companies engaging in various business sectors.

There are no specific maritime finance laws in Indonesia.

There are no specific entities in Indonesia that constitute a maritime finance entity.

See 1.2 Maritime Finance Entity,above.

There are no specific laws and regulations in Indonesia that define or categorise a certain project as a maritime finance project. However, Presidential Regulation No. 38 of 2015 on Cooperation between Government and Business Entities in Procurement of Infrastructure (PR 38/2015) regulates public/private partnership (PPP) schemes, and is considered one of the most common project financing methods in Indonesia. PR 38/2015 stipulates that the type of infrastructure that can be developed using a PPP scheme includes transportation-related infrastructure.

Specifically, Minister of Transport Regulation No. 58 of 2018 on Procedures for Cooperation between Government and Business Entities in Procurement of Infrastructure within the Ministry of Transport gives port infrastructure (including that of ferry ports) as the only sea transportation infrastructure that may be developed under a PPP scheme.

The Minister of Transport, however, may submit a request to the Minister of National Development Planning to use of a PPP scheme to develop other sea transport infrastructure.

Pursuant to Minister of Finance Regulation No. 150/PMK.010/2018 on Tax Holiday (MoF 150/2018), the tax holiday is available for economic infrastructure.

In July 2018, the Minister of Finance enacted regulation No. 73/PMK.08/2018 on Facility for Preparation and Performance of Collaborative Project Transaction between Government and Business Entities in Procurement of Infrastructure (MoF 73/2018), which includes fiscal incentives for PPP schemes.

These incentives may be provided for:

  • priority projects using a PPP scheme;
  • construction projects using a PPP scheme and/or domestic oil and gas refinery development; and
  • other projects using a PPP scheme that fulfil the requirements stated in MoF 73/2018. In this regard, referring to Presidential Regulation No. 75 of 2014 regarding Acceleration for Procurement of Priority Infrastructure, port (including ferry port) infrastructure is classified as priority sea transportation infrastructure.

The Indonesian government is yet to issue specific labour or immigration incentives for maritime finance projects.

Tax incentives/facilities under MoF 150/2018 are available in the form of corporate income tax reduction, with rates dependent on the capital investment plan of the business.

Further, MoF 73/2018 provides that the following fiscal incentives/facilities shall be available to projects using a PPP scheme:

  • facility for project preparation;
  • facility for transaction accompaniment; or

facility for both project preparation and transaction accompaniment. The facility for project preparation shall cover the preparation of a feasibility pre-study, along with all other studies and/or supporting documents. Meanwhile, the facility for  transaction accompaniment shall cover the implementation of a business entity, execution of the PPP agreement and aspects of the project’s financial closure.

See 1.5 Maritime Projects' Eligibility for Incentives, above.

See 1.5 Maritime Projects' Eligibility for Incentives, above.

As indicated in answer to 5 Maritime Projects' Eligibility for Incentives, above, eligibility for incentives is not necessarily limited to a maritime finance entity or maritime project. In general, to benefit from the available incentives, a project with a PPP scheme must satisfy the following:

  • to enjoy the tax facility pursuant to MoF 150/2018, the business entity must submit an application via the Online Single Submission (OSS) system, along with the relevant attachments pursuant to MoF 150/2018. Upon receiving the application, the OSS will submit it to the Minister of Finance via the Directorate General of Taxation and notify the business of the submission; and
  • to enjoy the facility pursuant to MoF 73/2018, the project manager for cooperation (eg minister/head of institution or board of directors of state-owned/regionally owned company) of a PPP project must submit an application to the Minister of Finance by attaching:
    1. documents showing the PPP project have fulfilled all requirements under MoF 73/2018; and
    2. a statement letter from the project manager confirming the documents attached in requesting for the facility are accountable and in accordance with the prevailing regulation regarding the PPP.

There are no designated authorities in Indonesia that specifically act as a maritime finance authority. In this regard, entities involved in maritime finance include the Ministry of Transport, Ministry of Finance and the Ministry of National Development Planning. In addition, Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or OJK) is authorised to oversee the financial services sector.

The concession period for corporate income tax reduction pursuant to MoF 150/2018 shall be between five and 20 years (from the start of commercial production), depending on the investment value.

There are no designated periods/expiration dates for facilities pursuant to MoF 73/2018.

Indonesia is not a party to LLMC 76 (including the 1996 protocol to amend LLMC 76).

See 2.1 LLMC 76, above.

Compared with LLMC 76, the limitation of liability under Indonesian law, which is regulated by the Indonesian Commercial Code ('Commercial Code'), recognises two types of limitation of liability:

  • package limitation of liability, as stipulated under Article No. 470 (2) of the Commercial Code, which allows the carrier to affix certain limitations of liability, amounting to no more than NLG 600 [Dutch guilders]; and
  • tonnage limitation of liability, as stipulated under Article No 474 of the Commercial Code, which restricts the liability of the carrier to a maximum NLG50 per cubic metre of net tonnage of the ship. In determining the tonnage for a mechanically propelled ship, various deductions from the gross tonnage of the space should be considered, which is occupied by the means of propulsion

Particularly for collision cases, Article No 541 of the Commercial Code stipulates that a ship may limit its liability to NLG50 for each cubic metre of the net tonnage of the vessel. In case the vessel is self-propelled, the net tonnage shall be calculated by excluding the space within the ship used for the engine.

There is no clear guidance on how Indonesian courts should interpret the above provision or how a liability amount in Dutch guilders would be applied in the present day, as the Commercial Code has not been developed or modernised since Indonesia’s independence in 1945.

Indonesian law does not provide a specific time bar for filing a limitation of liability action. Kindly note that the Indonesian Civil Code provides a 30-year general time bar for any legal claim.

See 2.3 Limitation of Liability, above.

Claims other than those stated in 2.3 Limitation of Liability, above.

Indonesian law is silent on specific conduct that bars the right to limitation of liability.

See 2.3 Limitation of Liability, above.

Generally, the claimant will try to break the limitation by establishing tort liability based on fault or gross negligence.

In Indonesia, the contracting parties are not only bound by whatever they have expressly stipulated in the contract, but also by every other obligation that stems from the nature of the contract, principles of fairness, customs and laws.

In practice, therefore, a claimant may use tort as the basis of its claim to pursue compensation, as the concept of liabilities and damages in tort are broader than those under contract.

In practice, the court has the freedom to decide based on the related party’s claim or the principles of fairness. Interpretation of limitation of liability may heavily depend on the panel of judges’ knowledge and experience in handling this type of claim. In principle, however, the court may conclude that limitation of liability under contract shall prevail upon the parties.

There are no specific provisions in Indonesian law that set out acceptable forms of security that need to be deposited when establishing a limitation fund. Generally, the claimant will request a cash deposit to establish such a fund.

While P&I Club LOUs may not be widely known in Indonesian courts, their popularity is continually growing as generally acceptable instruments for an amicable settlement.

There are no specific regulations regulating what happens to other claims and prior arrests once a limitation fund is established or constituted.

Indonesia does not have a specialised maritime court to examine and adjudicate civil claims related to maritime issues. All maritime claims are submitted to and examined by the relevant district courts (nb operating under the Ministry of Transportation is a unit called the Maritime Court (Mahkamah Pelayaran), which is involved in accident investigation – see 5 Marine Accidents in Waterways, below).

The judicial sale of a vessel is possible only after the claimant undergoes normal civil court proceedings and subsequently obtains a final and binding judgment that is favourable to them. If the respondent refuses to voluntarily comply with the judgment, the claimant must submit an application to the district court, rendering the judgment in the first instance proceeding to enforce the judgment against the respondent.

In receipt of the claimant’s application, the district court will summon the respondent to appear before the chairman of the court to be given a reprimand/warning to comply with the judgment within a maximum of eight days.

If this is not complied with, the district court will issue an order to seize any of the losing party's identifiable assets (in this case, vessel) to satisfy the judgment, which must be sold by way of public auction (judicial sale). The proceeds of the auction must be distributed to the claimant to satisfy the claim awarded in the judgment, and, if applicable, to other relevant parties.

The district court (as the seller) will make two public announcements giving details of the auction. The first will be by flyer, other physical media, electronic media or newspaper; the second will be by newspaper. The second announcement must be within 15 days after the first announcement and at least 14 days before the date of the auction.

The district court shall appoint an appraiser to determine the ‘limit value’ of the auctioned vessel. The limit value is the minimum auction price of the vessel and must be stated in the public announcements.

Indonesian law is silent on how many rounds may take place in a public auction. If there are no potential buyers in the first auction, another will be held.

The minimum bid is the previously determined limit value.

The date of the auction shall be that published in the public announcements (see 3.2 Notification of Judicial, above).

A prospective bidder does not have to make an appearance in the judicial sale proceeding with an attorney.

Participants of auctions must:

  • provide a guarantee, in the form of:
    1. a guarantee fee; or
    2. a bank guarantee; and
  • submit a taxpayer identification number (if necessary, depending on the value of the vessel).

The auction official will declare the successful bidder the buyer. The buyer is not permitted to collect or possess the vessel only after making payment and settling mandatory customs or any other lawful charges.

A party that has a judicially recognised credit against the vessel can place a bid during the judicial sale auction. The following, however, are prohibited from participating in the auction:

  • auction official and his/her parents/children;
  • husband/wife and siblings of the auction official;
  • district court;
  • auctioneer;
  • judges;
  • prosecutor;
  • court clerk;
  • court bailiff;
  • lawyer;
  • notary;       
  • land official;
  • appraiser;
  • official of the Directorate General of State Fund of the Ministry of Finance;
  • official of auction hall;
  • official of Class ii Auction Official Office;
  • all parties directly involved with the auction; and/or
  • respondent/debtor/executed party.

The auction official has sole authority in determining the winning bidder. Following a successful sale, the proceeds must be distributed to the claimant to satisfy the claim awarded in the judgment, and if applicable, to other relevant parties. The claimant is required to pay the cost of the public auction to the court in advance. This shall include costs related to the public announcements.

Indonesia is not a party to any carriage of goods by sea convention, eg, the Hague, Hague-Visby, Hamburg or Rotterdam Rules.

The Commercial Code governs issues relating to cargo and carriage of goods.

Carriage of goods by sea is a highly regulated business in Indonesia, although the main rules governing the business (under the Commercial Code) have not been amended since Indonesia’s independence in 1945. As such, the prevailing laws and regulations that govern the carriage of goods cover most related aspects, including charter parties, bills of lading, shipowner shippers, consignees and crews’ obligation, as well as marine casualty.

A bill of lading does form evidence of a contract of carriage.

Pursuant to chapter VA of the Commercial Code, the contracting parties are the shipper, carrier and consignee.

In practice, either the shipper, consignee, lawful holder of bill of lading, cargo owner or cargo insurer (by subrogation) is entitled to bring cargo claims against the carrier for losses or damages arising out of the alleged fault of the carrier.

Article 468 (2) of the Commercial Code provides that the carrier is liable to compensate any damages arising out of its failure to deliver the cargo, either partially or entirely, or out of any damage to the cargo – unless the carrier can establish that the damages to or non-delivery of the cargo was caused by an unforeseeable event beyond the control of the carrier; was due to the cargo’s nature, circumstances or a defect thereof; or was the fault of the shipper.

Article 466 of the Commercial Code defines a carrier as a person bound to provide full or partial services, either under the time charter, voyage charter or other agreements, for transporting goods by sea. Indonesian courts may identify the carrier as the shipowner, the party issuing the bill of lading (by reference to the letterhead of the bill of lading) or as the party to whom the charter is paid.

Indonesian law does not recognise in rem action against the vessel.

As stated in 4.9 Suing the Vessel, above, Indonesian law does not recognise in rem action.

Furthermore, although Indonesian law recognises the maritime lien concept, Article No 65 of Law No 17 of 2008 on Shipping ('Shipping Law') provides that claims based on losses of or damages to cargo and containers carried on the vessel shall not give rise to maritime liens.

However, there are no clear and comprehensive regulations under Indonesian law that provide a statutory procedure and timeframe for enforcing a maritime lien against a vessel. Further, there are additional concerns that Indonesian judges are not generally familiar with the concept of maritime liens against a vessel or cargo.

In practice, a claimant generally uses a tort claim instead of breach of contract of carriage to break the limitation of liability governing the carriage of goods.

However, the court may view a claim originating from a contract of carriage on the basis of tort as obscure due to the mixing of a tort and breach of contract claim (ie contract of carriage).

Generally speaking, Indonesian courts honour the freedom of contract and, thus, may honour the parties’ agreement to include Himalaya clauses in bills of lading.

Pursuant to Article 468 (2) of the Commercial Code, the carrier shall not be liable to compensate any damages to a cargo if such damages were caused by an unforeseeable event beyond the control of the carrier; were due to the cargo’s nature, circumstances, or a defect thereof; or were the fault of the shipper.

Please see 2 Substantive Provisions for Limitation of Liability for Maritime Claims, above.

When it comes to burden of proof, the general rule is that the party invoking legal consequences based on alleged circumstances must prove those circumstances. In this regard, the burden of proof rests with the claimant, who should provide evidence that the defendant has committed a tort/breach of contract causing damage to the claimant.

As for notice of loss or damage requirements, there is no obligation under Indonesian law for the claimant to provide a notice of loss to the carrier. In practice, however, several templates or standard forms of bill of lading stipulate that a notice of loss is necessary to claim for loss/damages arising from the performance of terms and conditions under the bill of lading. As for damages, the Indonesian Civil Code provides that damages shall consist of costs, losses and loss of profits.

Article 487 of the Commercial Code provides that a claim for a dispute arising from transport of goods shall be time barred for one year after the delivery of goods or after the date when the goods should have been delivered.

Based on the principle of freedom of contract, the parties may agree to set their own time bar for claims arising from or related to performance of the agreement (eg, contract of carriage).

Courts do recognise the validity of jurisdiction and choice of law clauses contained in a bill of lading.

Laws covering marine accidents in waterways are:

  • the International Regulation for Prevention of Collision at Sea of 1972, as ratified by Presidential Decree No 50 of 1979;
  • the Commercial Code;
  • the Shipping Law; and
  • relevant Ministry of Transport Regulations.

Ministry of Transport Regulation No. 129 of 2016 on Sea Waterways and Building and/or Installation on Water defines waterways/sea lanes as a body of water considered to be safe for sailing by a ship (as can be seen from its depth, width and free from other hindrance). On a related note, the Shipping Law defines Indonesian water as Indonesian territorial sea, archipelagic water and internal water.

In Indonesia, pilotage services are compulsory in pilotage waters. Article 198 of the Shipping Law indicates that the Minister of Transport will determine certain waters as compulsory pilotage waters and as special pilotage waters for safety navigation and security purposes, and to expedite shipping traffic on such waters and in port.

Article 3 of Minister of Transportation Regulation Number 57 of 2015 on Pilotage and Towage stipulates that determining compulsory pilotage waters and extraordinary pilotage waters is dependent on the extent to which the following affect safety navigation:

  • factors relating directly to vessels  that affect safety navigation – such as frequency of the shipping traffic, ship particulars (gross tonnage (gt), length and load), type of ship and nature of the cargo; and
  • external factors that affect safety navigation – such as depth of water, length of water flow, curvature and width of the waterway, current, obstacles/hazards of navigation, wind speed and wave height.

Under Indonesian law, the general rule is that the claimant, including the shipowner, may claim for damages against any party causing such damages, including a given authority. Claims for damages against an authority, however, are uncommon in Indonesia.

Indonesian law does not recognise inspectors. However, unless criminal action is suspected (which would necessitate a police investigation), in the event of a marine accident, relevant authorities may include the local port authority (under the Directorate General of Sea Communication – Seacom) and the National Transportation Safety Committee (NTSC).

Pursuant to the Shipping Law, the local port authority is authorised to carry out a preliminary investigation and, in practice, will co-operate with the NTSC, which is authorised to conduct investigations into accidents at sea.

Investigation by Port Authority and Maritime Court (if Required)

Pursuant to Article 2 of Minister of Transport Regulation No. 55 of 2006 regarding Procedures of Ship Accident Investigation (MoT 55/2006), a ship accident investigation must be conducted for all ship accidents within Indonesian waters and accidents involving Indonesian-flagged vessels outside of Indonesian waters. MoT 55/2006 stipulates that the following are considered  ship accidents:

  • sinking;
  • fire on board;
  • collision;
  • incident that threatens human life and results in damages/losses; and
  • grounding.

The port authority shall carry out a preliminary investigation/examination and may issue a recommendation to Seacom, whether or not an accident requires further examination. If Seacom approves the recommendation, further examination will be carried out by the Maritime Court.

Investigation by the NTSC

Pursuant to Article 256 of Shipping Law, the NTSC will carry out an investigation with a view to preventing similar accidents.

Pursuant to Article 13 of Government Regulation No. 62 of 2013 regarding Transportation Accident Investigation (GR 62/2013), the following must be investigated by the NTSC if they cause casualties, damages or pollution, or if a ship or water facility becomes operable:

  • an accident involving a passenger ship, ferry or fishing vessel of more than 100 gt; or
  • an accident involving a cargo ship or tanker of more than 500 gt.

Investigation by Port Authority and Maritime Court (if Required)

Shipping Law and MoT 55/2006 are silent on whether the port authority may investigate any event other than accidents, which is compulsory under Article 2 of MoT 55/2006.

Investigation by the NTSC

Generally speaking, Shipping Law, in conjunction with GR 62/2013, stipulates that the NTSC may investigate any accident involving Indonesian-flagged vessels, whether inside or outside of Indonesian waters, as well as those involving foreign-flagged ships that occur within Indonesian waters.

Investigation by a port authority and the Maritime Court (if required) involves the following:

  • upon the occurrence of a ship accident, the master of the vessel (or any other person on board if the master in unavailable) or shipowner must report it to the nearest port authority (if the accident occurred in Indonesia). If the accident or the first port after the accident occurred is not in Indonesian territory, the report must be made to the nearest Indonesian representative and authorised local government official;
  • the accident report shall be made in the form of a Ship’s Accident Report, as provided in MoT 55/2016, and conveyed to Seacom;
  • the port authority shall conduct preliminary examination by questioning the master, ship’s officer, crew or other parties. The results of the preliminary examination shall be made in the form of Minutes of Preliminary Examination, as provided in MoT 55/2016, and conveyed to Seacom within 30 days of the conveyance of the Ship’s Accident Report; and
  • following Seacom’s receipt of Minutes of Preliminary Examination, the authority may:
    1. conclude the investigation/examination; or
    2. convey the minutes and supporting documents to the Maritime Court for further examination.

The Maritime Court is authorised to carry out further examination of investigation results issued by Seacom, and may determine whether the master or crew of the related ship has breached regulations regarding code of ethics and seaman competency.

In the event an incident requires further examination by the Maritime Court, it shall:

  • form a tribunal panel to determine a party/person as a suspect liable for the marine accident;
  • summon the relevant parties (eg master, crew and shipowner) for further examination via a court hearing;
  • (based on the examination) render a judgment against the suspect, which may contain an administrative sanction (ie warning, suspension or revocation of proficiency certificate) – this judgment must be rendered no more than one month from the conclusion of further examination.

In the event of an investigation by the NTSC, it shall:

  • receive a notice of accident from:
    1. master of vessel;
    2. shipowner; or
    3. Seacom;
  • prepare for investigation by forming an investigation team, preparing investigation equipment and co-ordinating with relevant institutions or ship operators;
  • conduct preliminary examination to collect relevant information in regard to the accident; and
  • if required, conduct further investigation.

Claims for damages against an authority are rare in Indonesia. However, in theory the claimant may file a civil claim at the relevant district court against the authority to recover any damages incurred.

It should be noted that under Indonesian law there are no specific types of claim that can be made against the relevant authority to recover damages incurred by a shipowner. Further, Indonesian law prohibits seizure/attachment against government property.

Considering there are no specific types of claim that may be made against the relevant authority to recover damages incurred by a shipowner, the time bar for claim shall be subject to the matter claimed to the court.

The general time bar for civil claim under the Indonesian Civil Code is 30 years.

See 5.9 Initiating Claims for Damages, above.

See 5.9 Initiating Claims for Damages, above.

See5.9 Initiating Claims for Damages, above.

See 5.9 Initiating Claims for Damages, above.

See 5.9 Initiating Claims for Damages, above.

See 5.9 Initiating Claims for Damages, above.

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Law and Practice

Authors



Budidjaja International Lawyers has substantial experience in providing advice and solutions to clients doing business in the Indonesian shipping sector. It has represented clients in a wide range of disputes, including contracts, groundings, unlawful arrests, bunker disputes, cargo loss, ship collisions and oil pollution incidents. Foreign law firms regularly engage Budidjaja International Lawyers to provide them with expert advice and opinions on Indonesian shipping law. The firm is also well known for regularly representing clients in all aspects of restructurings and bankruptcy, including out-of-court restructurings, and where appropriate it advises on and represents client through litigation and insolvency procedures. Its clients include local and multinational banks, financial institutions and companies engaging in various business sectors.

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