Corporate Liability for Corruption in Indonesia

Legal Updates
Corporate Liability for Corruption in Indonesia
10 July 2014

By Michael S. Carl and Nico Mooduto

Anti-corruption compliance is rightly a focus of companies operating in Indonesia. One of the more interesting questions for such companies, particularly foreign investment companies, is whether the company and/or individual company directors can be prosecuted for corruption as a result of the actions of employees.

Based on a plain-English reading of Law No. 31 Year 1999 regarding Eradication of the Criminal Act of Corruption, as amended by Law No. 20 Year 2001 (the "Corruption Law"), a company and/or individual directors may be exposed to potential criminal charges for corruption.

Potential Corporate Liability

Articles 2, 3 and 5 through 16 of the Corruption Law delineate the perpetrator of a criminal act of corruption with the phrase setiap orang (any person). Orang (person) itself is defined under Article 1 point 3 of the Corruption Law to include a company. Pursuant to Article 1, point 1 of the Corruption Law, a company is a group of persons and/or assets organized either as a legal entity or as a non-legal entity. Therefore, any person, which includes a company, committing a criminal act of corruption under one of the foregoing provisions of the Corruption Law may be punished with criminal sanctions.

The liability of a company for criminal acts under the Corruption Law is specifically enshrined in Article 20 of the Corruption Law, which, in the relevant part, reads as follows:

  1. If a criminal act of corruption is committed by or in the name of a company, the criminal charges and verdict may be made against the company and/or its officers.
  2. Criminal acts of corruption are committed by the company if such criminal acts are committed by persons based on an employment relationship or other relationship, acting in the corporate scope, whether alone or in concert.

Despite the clear language of the Corruption Law, there are very few cases in which the Indonesian courts have subjected a company to criminal liability for corruption. We have found only two court decisions in the area of corruption law that have applied the concept of corporate criminal liability. The cases involved PT Giri Jaladhi Wana, decided by the Banjarmasin District Court in 2011, and PT Indosat Mega Media (IM2), decided by the Corruption Court in 2013.

It is worth noting that in both cases the corrupt acts were committed by directors and the companies were held to have benefited directly from the corruption. Thus, while the Corruption Law permits the bringing of charges against a company, the fact remains that law enforcement agencies have been reluctant to invoke its provisions against companies as opposed to individuals.

Potential Director Liability

There is also a legal question whether Directors may be held individually responsible in their corporate capacities for alleged acts of corruption by others in their organizations. Looking at the matter more broadly, the question is whether the Indonesian criminal justice system will hold an individual criminally responsible for acts of corruption by virtue of the person's status or position regardless of whether the person had direct involvement in the acts of corruption. Phrased differently, the question is whether a director may be held liable by reason of his/her acts or omission in failing to prevent the corruption.

Article 20 of the Corruption Law indicates that an officer, including a director, may be charged where a criminal act of corruption is committed by or in the name of a company. However, we read this provision as requiring the director to have adopted policies or given directions giving rise to the act of corruption. We could not find instances in which an individual was held criminally liable under the Corruption Law by reason of his or her status or position alone, for example, by reason of his or her serving as a director.

Indonesian law enforcers and courts appear to require, at a minimum, that a person direct or cause the corrupt act or, perhaps, have knowledge of the corrupt act. In the several cases in which individuals in positions of responsibility were held criminally liable under the Corruption Law, the courts scrutinized the defendant's individual involvement in the corruption to determine his or her guilt. In all of the cases that we examined, the guilty defendants were in one way or another personally/directly involved in the corruption.


A plain-language reading of Indonesia's Corruption Law indicates that companies and directors may be prosecuted for the corrupt acts of their employees. In practice, companies have indeed been found guilty where they have benefited from the acts of their directors. Conversely, the law is yet to be tested on whether, by virtue of his/her position alone, a director may be held individually liable for corruption committed by others.

About SSEK

SSEK Legal Consultants is a leading full-service corporate and commercial law firm based in Jakarta, Indonesia. Since its founding in Jakarta in 1992, SSEK has grown to one of the largest and most highly regarded corporate law firms in Indonesia. SSEK is recognized by independent legal directories including Chambers & Partners, The Legal 500 and Asia Law as a leading law firm in Indonesia across all major practice areas including banking and finance, capital markets, corporate law and mergers and acquisitions, construction and real estates, energy and natural resources, IT and telecommunications, labor and employment, project finance, restructuring and insolvency, and shipping. SSEK has been named the Indonesian Law Firm of the Year on multiple occasions.

This article originally appeared in Asian-MENA Counsel magazine. This article is intended for informational purposes only and does not constitute legal advice. This article should not be acted upon in any specific situation without appropriate legal advice.

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