


SSEK Legal Consultants founding partner Dyah Soewito, senior foreign legal advisor Michael D. Twomey and Stephen Igor Warokka, an associate at the firm, have contributed the Indonesia chapter of the new Getting the Deal Through global guide to Ship Finance. SSEK has one of the leading shipping practices in Indonesia. SSEK advises multinational and joint venture shipping and offshore drilling companies on all aspects of their operations in Indonesia, including advising on the establishment of joint venture companies, the opening of representative offices and the acquisition and sale of vessels. SSEK is ranked as a tier-one shipping firm by The Legal 500 and is highly recommended for its shipping practice by Asialaw.
The following is an excerpt from the Indonesia chapter of the Getting the Deal Through global guide to Ship Finance written by SSEK Legal Consultants.
May finance leases or other charters be recorded over vessels flagged under the laws of the Indonesian jurisdiction?
By law, finance leases or other charters can be recorded over Indonesian-flagged vessels. However, we are not aware of any instance where a Directorate General of Sea Transportation (DGST) office has accepted an application to register a finance lease or other charter.
May finance leases be recharacterized by a court as a financing contract? If so, is there any procedure for protecting the lessor's interest against third-party creditors?
To our knowledge, finance leases are not used to finance vessels. Domestic finance leases can only be entered into with companies licensed as finance leasing companies by the Ministry of Finance and offshore finance lease transactions present substantial licensing issues as well as import issues if the vessel is being acquired from an offshore entity.
How is a security interest created over earnings of a vessel, charter contracts, insurances, etc.? How are these security interests perfected?
Security interests are created by executing fiduciary security deeds (FSDs) and registering FSDs in the Fiduciary Registration Office (FRO). The security interest is perfected upon such registration. Only receivables under a contract can be subjected to an FSD - other rights and obligations under a contract cannot be assigned for security purposes.
Must security interests against non-vessel collateral be registered to be enforceable? If so, where are such filings made?
Security interests against non-vessel collateral that are created under an FSD must be registered at the FRO.
How is a security interest over a deposit account established? How is a security interest perfected?
Under Indonesian law, a pledge can be granted only over moveable property and the property needs to be in the control of the creditor for the pledge to be perfected. As a result, given that for most types of accounts there is often not a document or other physical item that can be given to the creditor, it is not possible for a pledge over an account to satisfy the control requirement and it is not known if constructive control would be sufficient to satisfy this requirement. By constructive control, we mean the creditor will have contractual rights in respect of the account and the bank at which the account is maintained will acknowledge the pledge and the creditor's rights. Accounts that are evidenced by a certificate can be pledged since the certificate can be delivered to the creditor.
The FRO's current position is that it will not accept registration of FSDs over bank accounts or bank account receivables.
How are security interests in non-vessel collateral enforced?
Moveable assets subject to FSDs are enforced like a mortgage. The colÂlateral can be sold privately if the borrower does not object otherwise, they will need to be sold by the State Auction Office after the creditor has obtained a court order for the same.
How are share pledges for vessel financings established? Are share pledges or share charges common in your jurisdiction?
Pledges of shares for vessel financings are created in the same manner as any other pledge. The pledge is documented by a pledge of share agreeÂment or an FSD over the shares. Share pledges are perfected by registering the pledge in the relevant company's shareholder register. It is necessary to deliver physical share certificates to a pledgee. Bearer share certificates are allowed, but they are not common. Share pledges or share charges are common in Indonesia.
Is there a risk that a pledgee, before or after exercise of the share pledge, may be exposed to debts or other liabilities of the pledged company?
There is no risk that a pledgee, before or after exercise of the share pledge, may be exposed to debts or other liabilities of the company whose shares are pledged.
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. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.