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W&P Newsletter – The Omnibus Law After The Constitutional Court Decision Of 2021

When the House of Representatives passed the so-called ‘Omnibus Law on Job Creation’ (Undang-Undang Cipta Kerja) (“Omnibus Law”) back in October 2020, the public responses were divided. Most businesses showed a positive response to the Omnibus Law, believing the single, all-embracing law could cut the bureaucratic red tape and improve transparency in Indonesia. However, the Omnibus Law also at the same time drew widespread opposition from various civil society groups, which then filing for a judicial review at the Constitutional Court.

On 25 November 2021, the Constitutional Court rendered its decision on the judicial review of the Omnibus Law. Below are some highlights and our view of the Constitutional Court’s decision:

  1. The Constitutional Court did not in fact “touch” the substance of the Omnibus Law as it merely focused on the procedural flaw in the establishment of the Omnibus Law from the perspective of Law No. 12 of 2011 on the Establishment of Laws and Regulations (as amended).
  2. In light of the above, the Constitutional Court does not immediately invalidate the Omnibus Law but instead only orders the Government and the House of Representatives to “revise” it within 2 years. If no revision is made within the prescribed time frame, the Omnibus Law will be deemed permanently unconstitutional and invalid.
  3. During the 2-year period, the Omnibus Law remains in force, but the Government is prohibited from issuing new implementing regulations for the Omnibus Law.
  4. As cited by the media, the Coordinating Minister for Economic Affairs said that the Government will immediately follow up on the Constitutional Court’s decision by preparing the necessary amendments to the law. This is consistent with the official statement given by a Vice Speaker of the House of Representatives saying that the House will comprehensively review the Constitutional Court’s ruling and will take all necessary actions to comply with the decision. This should give certain comfort to businesses because it hints that the Government and the parliament will work together to “revise” the procedural flaw in the Omnibus Law within the 2-year period as ordered by the Constitutional Court. Although businesses may anticipate changes to the Omnibus Law, many practitioners seem to believe that the likelihood for substantial changes would be rather small.
  5. All business licenses that have been issued prior to the Constitutional Court’s decision will remain in full force and effect. However, it remains to be seen whether the Government will take a conservative approach and suspend all future applications of business licenses under the Omnibus Law, although this unlikely to be the case, considering the Government’s constant positive attitude towards the investment . Furthermore, it should also be interesting to see how courts will adjudicate any disputes relating to the new severance package formula introduced by the Omnibus Law.

We will continuously monitor this matter and will keep you updated on any developments.

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