Indonesia’s New Criminal Code: Essential Things to Know about Corporate Liability

On 2 January 2023, the Indonesian President approved a new law (the New Criminal Code) to replace the century-old Indonesian Criminal Code (the ICC), which dated back to 1915, during the Dutch East Indies colonial era. 

Efforts to update the ICC first began in 1963 at a National Law Seminar. Since then, multiple drafts and versions have been debated by parliament over many years but without resolution, until now.

New Criminal Code Covers Vast Array of Crimes

The New Criminal Code revisits various criminal offences previously regulated under separate laws and by the ICC itself. It takes precedence over those laws, also revising many of the sanctions that they contained for corruption, bribery, and money laundering crimes.

Making Corporations the Subjects of Criminal Offences

The ICC did not recognise the concept of corporate criminal liability, which only covered certain crimes regulated outside the ICC. The New Criminal Code allows any criminal offences that it regulates to now be attributable to a corporation, unless stated otherwise. 

The definition of “corporation” has also been expanded to cover any legal entity in the form of:

“a limited liability company, foundation, association, cooperative, state-owned enterprise, regionally-owned enterprise or its equivalent, and any unincorporated association and business entity in the form of a firm, limited partnership or its equivalent.”

Despite that development, the New Criminal Code does not place a corporation within its definition of a “victim”. So, while a corporation can be held liable for acts of fraud and embezzlement, it cannot be deemed the victim of fraud or embezzlement.

Far-reaching Criminal Liability

Various laws (outside the ICC) covering corporate criminal liability allow for such liability to be extended to a corporation’s directors, senior officers and employees. However, the New Criminal Code takes this a step further. 

Before the New Criminal Code, only a few laws could extend corporate criminal liability to the controlling party of a corporation - for instance, in cases of money laundering or terrorism financing. However, under the New Criminal Code, when a corporation is deemed liable for a crime, their controlling party or beneficial owner may also be held liable.  

Factors to Consider When Criminalising a Corporation

Supreme Court Regulation No. 13 of 2016 on Procedures for Handling Criminal Cases committed by Corporations (SC Reg 13/2016) sets out three factors to consider when assessing a corporation’s criminal culpability, namely, whether the offence: 

1. benefitted the corporation;
2. was allowed to occur by the corporation; or
3. was not prevented by the corporation.

The New Criminal Code adopts these three criteria and also introduces two additional factors to consider:

1. whether the criminal offence was committed within the scope of the corporation’s business activities (as reflected in its articles of association); and/or
2. whether the criminal offence was accepted by the policy of the corporation.

Where a corporation has been found guilty of a crime, the New Criminal Code sets out various elements for judges to consider when determining the severity of the punishment: 

1. amount of damages caused;
2. degree of involvement of company personnel holding functional positions, the person ordering the action, the controlling party, and/or the beneficial owner;
3. duration of criminal offence;
4. frequency of criminal offence;
5. form of criminal offence;
6. involvement of public officials;
7. traditional laws or norms applied by the community;
8. track record of the corporation in conducting its business and activities;
9. impact of penalising the corporation; and/or
10. degree of cooperation from the corporation during the criminal proceedings.

New Forms of Criminal Sanctions

The New Criminal Code also introduces a new punishment for corporations found guilty of a crime, through the use of “measures” (tindakan). Measures may be imposed as an “additional punishment” (pidana tambahan) to the “main punishment” (pidana pokok) of the fine imposed against the corporation. 

There are three kinds of measures: (i) taking over the corporation; (ii) placing it under supervision, and/or (iii) placing it under management (pengampuan). Details on implementation of these measures are to be set out in a government regulation. 

The New Criminal Code also revises the use of fines as punishment for crimes by setting out eight categories of fines (Category I to Category VIII), with each criminal offence subject to a fine being given a particular category. Each category has a different maximum fine, as set out in the accompanying table.

A corporation cannot face a fine below Category IV (unless specified otherwise in the New Criminal Code). If a corporation has committed an offence punishable by a prison term, then the maximum fine applicable will depend on the length of the prison term. 

For example, in a crime of embezzlement (Article 486 of the New Criminal Code) where a corporation has committed an offence punishable by a maximum prison term of four years and a maximum fine at the level of Category IV, the corporation will face a minimum fine of Category IV and a maximum fine of Category VI.

Next Steps 

The New Criminal Code will become effective within three years after its enactment - ie, by 2 January 2026. Once it becomes effective, all ongoing criminal proceedings will refer to the New Criminal Code, as applicable. However, a suspect or defendant may opt to apply the previously applicable law if that is more beneficial to them (in terms of either the prison term or the amount of the fine). 

Indonesia’s Minister of Law and Human Rights has said that the government and parliament will use the next three years to socialise the New Criminal Code among the public, law enforcement officers and universities. And the New Criminal Code itself states that all implementing regulations must be issued within two years after its passage by the House of Representatives.

Until then, corporations have plenty of time to consider how the New Criminal Code may affect their business going forward, and make any necessary preparations. For corporations, while understanding this new law is important, navigating its legal consequences is critical.

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We will publish further updates as detailed rules and policies become available.