On 25 November 2021, the Constitutional Court of the Republic of Indonesia (the “Constitutional Court”) issued Decision No. 91/PUU-XVIII/2020 (“CC Decision 91/2020”) with salient rulings affecting the constitutionality and validity of Law No. 11 of 2020 on Job Creation (the “Job Creation Law”). While the seminal decision is based on a judicial review of the procedural aspect and not the substantive aspect of Job Creation Law, it nonetheless divides and bewilders the country today as many believe that it reverses the positive legislative reforms achieved by the Job Creation Law.
The Petition
On 15 October 2020, the petitioners, consisting of a private company employee, four students and the Confederation of Indonesian Workers’ Unions (collectively, the “Petitioners”), filed a petition for judicial review before the Constitutional Court challenging the validity of the Job Creation Law on the main ground that its enactment contravened the fundamental legislative process set out in Law No. 12 of 2011 on the Formulation of Laws and Regulations as amended by Law No. 15 of 2019 (the “Law on Formulation of Laws and Regulations”) (the “Petition”). The Petitioners prayed that the Constitutional Court declare the Job Creation Law as unconstitutional based on, among others, the following grounds:
a. the nature of the Job Creation Law is obscure, and it is unclear whether it operates as a new law, an amendment, or a revocation of a preceding law;
b. the use of the term “Omnibus Law” in relation to the Job Creation contradicts what is referenced in its preamble –the preamble implies, among others, that the Job Creation Law is made in accordance with the Indonesian Constitution of 1945 jo. Law on Formulation of Laws and Regulations and states that it serves as an “Omnibus Law” – a law that amends and revokes a number of preceding laws passed by different sectoral authorities, which is not recognized by the Law on Formulation of Laws and Regulations;
c. the revisions to the Job Creation Law, which have been jointly approved by the House of Representatives and President of the Republic of Indonesia, have substantial and technical errors – the Petitioners argued that that there were further substantial revisions jointly made by the regulators after a plenary meeting ratifying the draft Job Creation Law was held between the President of the Republic of Indonesia and the House of Representatives (“Plenary Meeting”). The Petitioners posited that this should not be the case as the draft Job Creation Law should be in final form following the commencement of a Plenary Meeting. The Petitioners also argued that there were erroneous citations and references in the body of the law; and
d. the Job Creation Law contradicts Article 22 of the Indonesian Constitution of 1945 – the Petitioners argued that the text of the Job Creation Law is flawed as certain required principles in the law-making process were not fully met, among others, the principles of clear purpose, versatility and result, clear formulation and openness.
The CC Decision 91/2020
Voting 5-4, the Constitutional Court ruled in favour of the Petitioners, declaring the Job Creation Law as “conditionally unconstitutional” for not undergoing the formal process for deliberating and ratifying a new piece of legislation.
The Constitutional Court’s decision requires that the Job Creation Law be corrected and amended within two years from the date of its publication (the “Corrective Period”). In the decision, the Panel of Judges also ruled that a new regulation should be enacted for corrective amendments to laws and regulations, as the Law on Formulation of Laws and Regulations only governs the process of issuing and amending laws and regulations, and not correcting an enacted law and/or regulation.
CC Decision 91/2020 mandates that the Job Creation Law shall remain in full force and effect during the Corrective Period. However, any strategic and broad-impact actions or policies related to the Job Creation Law shall be suspended and any issuance of new implementing regulations to the Job Creation Law shall not be permitted.
Should the government fail to make corrective amendments on the Job Creation Law at the end of the Corrective Period, the Job Creation Law would thereafter be deemed as “permanently unconstitutional”. If this happens, the 78 (seventy-eight) laws that were amended, repealed, and/or superseded by the Job Creation Law shall be deemed as automatically revived, and will again take full force and effect.
It is worth mentioning that under Indonesian laws, there is no available legal remedy to challenge decisions made by the Constitutional Court.
Public Response and Key Takeaways
The Indonesian government has declared that it respects CC Decision 91/2020 and will take the necessary steps to enact the required corrective amendments to the Job Creation Law.
The following are controversial and key takeaways from the decision:
a. The Job Creation Law and its enacted implementing regulations remain valid and in full effect within the Corrective Period. However, it should be amended to effect corrections during the Corrective Period.
b. During the Corrective period, the government is prohibited from issuing any implementing regulations of the Job Creation Law and was instructed to suspend any strategic and broad-impact actions or policies related to the Job Creation Law, including projects that have been claimed to have abolished workers’ rights and harmed the environment.
c. Although corrective amendments are required to only cover the form and drafting of the Job Creation Law, it is possible that several substantial provisions of the Job Creation Law may also be amended.
While it is still too early to determine the repercussions of CC Decision 91/2020 at this juncture, based on the government’s reaction to the CC Decision 91/2020, we believe that the government and the parliament will act swiftly in making the necessary amendments or corrections to the Job Creation Law in the next parliament meeting scheduled for early next year. Until such time, however, there is no guarantee that there would be no uncertainty in the implementation of the Job Creation Law or that the government/parliament will have the same understanding as the Constitutional Court in respect of the amendments or corrections that need to be done on the Job Creation Law.