Director General of Sea Transportation Reaffirms Vessel Registration Requirements for Joint Venture Shipping Companies in Indonesia

The Director General of Sea Transportation (“DGST”) of the Indonesian Ministry of Transportation has reaffirmed the ship registration requirements for joint venture shipping companies with foreign ownership by virtue of the issuance of Circular Letter No. SE–DJPL 31 of 2024 dated August 19, 2024, regarding Supervision of the Implementation of Ship Registration Activities and Licensing of Sea Transportation Business Ventures (the “DGST CL 31/2024”).

DGST CL 31/2024 particularly mandates new instructions for Vessel Title Transfer and Registrar Officials (Pejabat Pendaftar dan Pencatat Balik Nama Kapal). These officials are now required to examine any vessel registration application submitted by an Indonesian entity with foreign share ownership (a joint venture or “JV”) to strictly comply with the requirements of Article 93(2) letter c of Government Regulation No. 31 of 2021 regarding the Implementation of the Shipping Sector ("GR 31/2021").

Under GR 31/2021, a vessel may be registered in Indonesia by a JV company insofar as the majority of shares of the JV company are owned by:

• a national sea transportation company whose shares are wholly owned by Indonesian citizens (“Indonesian-Owned Shipping Company”) for commercial activities; and/or
• Indonesian legal entities whose shares are wholly owned by Indonesian citizens for non-commercial activities, including social activities, tourism, sports,

(collectively, “Vessel Ownership Shareholding Requirement”).

With the purpose of further reaffirming, clarifying, and introducing additional provisions on the Vessel Ownership Shareholding Requirement, DGST CL 31/2024 stipulates the following:

1. Vessel Title Transfer and Registrar Officials must supervise and give due consideration to ensure that:

• The shareholder composition of the vessel-owning JV company must be no more than 49% foreign shareholders, with the remaining 51% of shares owned by a domestic or wholly Indonesian entity. This domestic shareholding portion can be held either by:

1. 1. a single Indonesian-Owned Shipping Company; or
   2. multiple domestic investors/entities, which may consist of an Indonesian-Owned Shipping Company together with other Indonesian individual citizens or wholly Indonesian business entities.

• Within the JV, the Indonesian-Owned Shipping Company must hold the largest percentage of shares among the other domestic investors/entities, and/or must maintain a larger stake than the foreign shareholder(s).

2. Vessel Title Transfer and Registrar Officials must verify the shareholding composition of the Indonesian-Owned Shipping Company being the shareholder in the JV, which must be documented through:

• A statement letter detailing the beneficial ownership structure, duly stamped with stamp duty and signed by the President Director of the Indonesian-Owned Shipping Company; and
• Information and data on the share ownership up to its ultimate beneficial owner.

3. Vessel registrations initiated or processed prior to the effective date of DGST CL 31/2024 may continue to be processed under the previous circular letter, or, if more beneficial to the vessel owner, may be processed under DGST CL 31/2024.

4. Vessel-owning JV companies that have obtained business licenses pursuant to applicable laws may continue to operate the vessels duly registered in their ownership. Notwithstanding the above, such entities shall be required to adjust their shareholding composition to comply with the provisions of DGST CL 31/2024 if they register any new vessel in their name following the issuance of the circular. In relation to this point, DGST CL 31/2024 appears to include a grandfather clause that exempts currently licensed JV shipping companies from adjusting their shareholding compositions to conform with the Vessel Ownership Shareholding Requirement.

Conclusion

Based on the foregoing, DGST CL 31/2024 asserts the commitment of the Indonesian government to fully enforcing the Vessel Ownership Shareholding Requirement and mandating that vessel-owning JV companies include an Indonesian-Owned Shipping Company as a shareholder, with the Indonesian-Owned Shipping Company holding the majority of shares among the shareholders in the JV shipping company.

The circular further provides more guidance on the verification of shareholding structures, extending to beneficial ownership proof, which further highlights the requirement that a vessel may only be registered in Indonesia by foreign investors in partnership with a local shipping company.

While these provisions clarify requirements under GR 31/2021 for JV companies with foreign ownership, there is still ambiguity concerning their application to non-shipping companies that own vessels and hold a Special Sea Transportation Operation License (SIOPSUS) for supporting their primary business.

Taken together with the anticipated amendment to the Indonesian Shipping Law, these changes highlight the increasingly complex regulatory landscape facing businesses in the maritime sector, especially with regard to structuring shareholding to comply with the Vessel Ownership Shareholding Requirement.

Further reading:

Shipping Law – Indonesia

This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user’s own risk. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.