INDONESIA Law and Practice Contributed by: Agus Ahadi Deradjat (Agung), Gustaaf Reerink, Adri Dharma, Karina Widyaputri and Ilma Sulistyani, ABNR Counsellors at Law
1. Legal System 1.1 Legal System and Judicial Order
2. Restrictions on Foreign Investments 2.1 Approval of Foreign Investments As a general rule, foreign investors are not required to obtain prior approval to invest in Indonesia. Not - withstanding the above, every business undertaking in Indonesia, whether domestic or foreign-owned, is required to obtain the appropriate licences based on its business activities in order to operate legally in the country. Under the current regulatory framework, business licensing is processed through the Risk-Based Approach Online Single Submission System (“RBA OSS System”), which is administered by the Indo - nesian Investment Coordinating Board (BKPM). The type of licence required depends on the risk level of the business activities, as classified within the RBA OSS System. This risk classification directly affects the scope and complexity of the applicable licensing requirements. Business activities deemed to carry a higher level of risk are subject to more stringent licensing obliga - tions. Conversely, if a business activity is considered low-risk – ie, it does not have a significant impact on health, safety, the environment, or the utilisation of resources – it will generally only require a Business Identification Number ( Nomor Induk Berusaha or NIB) to operate, without the need for additional licensing. Business activities classified as medium-low, medi - um-high, or high risk are subject to additional require - ments, which may include standard certifications, business licences, and/or commercial or operating licences, depending on the risk level and the nature of the activity. The applicable licensing requirements for each risk category are detailed in Government Regulation No 28 of 2025 (“GR 28/2025”) on the Implementation of Risk-Based Licensing, which supersedes the previous Government Regulation No 5 of 2021 (“GR 5/2021”). These requirements are further regulated by imple - menting technical regulations, including ministerial regulations.
The Indonesian legal system adopts the civil law system, where statutory law constitutes the prima - ry source of law. While judicial precedents may be considered by judges in rendering decisions, they do not carry binding authority as they do in common law systems. The basic organisation of the judicial order in Indone - sia is structured under the authority of the Supreme Court ( Mahkamah Agung ) and consists of four branch - es of courts, each with a two-tiered structure (first instance and appellate level), as follows. • General Court ( Peradilan Umum ), which has juris - diction over civil and criminal cases involving the general public. • State Administrative Court ( Pengadilan Tata Usaha Negara ), which has jurisdiction over disputes aris - ing from state administrative decisions (eg, issu - ance of government permits or sanctions). • Religious Court ( Pengadilan Agama ), which has jurisdiction over personal and family law matters for Muslims (eg, marriage, divorce and inheritance). • Military Court ( Pengadilan Militer ), which has jurisdiction over criminal offences committed by members of the military. In addition to the Supreme Court, Indonesia also has the Constitutional Court ( Mahkamah Konstitusi ), which functions as a judicial body of first and final instance, with decisions that are final and binding. The Constitu - tional Court has jurisdiction over the following matters: • judicial review of laws against the constitution; • disputes concerning the authority of state institu - tions; • disputes regarding the results of general elections; • the dissolution of political parties; and • the impeachment of the president or vice presi - dent.
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