INDONESIA Trends and Developments Contributed by: Emir Nurmansyah, Ulyarta Naibaho, Muhammad Muslim and Adithya Lesmana, ABNR Counsellors at Law
majoring in comparative and international dispute resolution.
ABNR Counsellors at Law Graha CIMB Niaga 24th Floor Jalan Jenderal Sudirman Kav. 58 Jakarta 12190 Indonesia
Tel: (62) 21 250 5125 Fax: (62) 21 250 5001 Email: Info@abnrlaw.com Web: www.abnrlaw.com
The Third Amendment to Law No 17 of 2008 on Ship - ping (the “Shipping Law”) through Law No 66 of 2024 (the “Third Amendment”) was enacted on 28 Octo - ber 2024. It introduced tighter restrictions on foreign investment in Indonesia’s shipping industry. These restrictions are applicable not only to foreign JV ship - ping companies operating in Indonesia, but also to any foreign joint ventures engaged in mining or indus - trial activities that utilise vessels to support their main business. Complex and Stricter Requirements for Foreign Investors The Third Amendment places stricter restrictions on foreign investment in the shipping sector by signifi - cantly increasing vessel ownership requirements for foreign JV shipping companies. New foreign JV ship - ping companies can only own and operate vessels of at least 50,000 Gross Tonnage (GT) each – slightly larger than a Panamax vessel. This marks a major change from the previous rule, which required only one vessel with a minimum of 5,000 GT. In addition, joint ventures must partner with a “Nation - al Shipping Company” that holds at least 51% of the shares. A National Shipping Company is defined as a limited liability company engaged in sea transpor - tation activities, possessing a valid sea transporta - tion business licence, and fully owned by Indonesian shareholders up to the ultimate ownership level. Con - sequently, even an Indonesian wholly owned com -
pany would now be prohibited from holding a 51% stake in a JV shipping company unless it has a sea transportation business licence and therefore qualifies as a National Shipping Company. As a background, Indonesian law has previously established that any company with foreign ownership – even partial – cannot qualify to hold the 51% stake in a JV shipping company, even if it is incorporated under Indonesian law. Under the previous regime, for - eign investors could partner with any Indonesian indi - vidual or entity to meet the 51% ownership require - ment. However, the Third Amendment now mandates that the majority shareholder must be a National Sea Transportation company with a valid licence. This requirement also applies to foreign joint ventures in non-shipping sectors that operate vessels for their own use – they too must own at least one vessel of 50,000 GT. It should be noted that the Third Amendment includes a grandfathering provision that exempts JV sea trans - portation companies, which already own vessels and began operations prior to the enactment of the leg - islation, from the new vessel ownership requirement. This new vessel ownership requirement came into effect one year after the legislation’s enactment on 28 October 2024. However, there are limitations to the applicability of this “grandfathering” provision. JV sea transportation
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