INDONESIA Law and Practice Contributed by: Stephen Igor Warokka and Mutiara Kasih Ramadhani, SSEK Law Firm
• electricity activities (performed by power plant vessels); and • terminal construction. To be able to conduct these activities, foreign- flagged vessels must apply for an approval for the use of foreign vessel ( persetujuan penggu- naan kapal asing – PPKA ) after obtaining their SIUPAL/Standard Certificate. Vessel Ownership Shareholding Requirement Before the introduction of GR 31/2021, vessel registration in Indonesia was governed under the Shipping Law and MOT Reg 39/2017. Arti - cle 158(2) of the Shipping Law and Article 5(2) of MOT Reg 39/2017 stipulate identical criteria for vessels to be eligible for registration in Indo - nesia, as follows: • vessels with a gross tonnage of at least seven GT; • vessels owned by Indonesian citizens or legal entities established under Indonesian law and domiciled in Indonesia; and • vessels owned by Indonesian legal entities that are joint ventures whose majority shares are owned by Indonesian citizens. While Article 93 of GR 31/2021 consistently provides the same wording as above, the elu - cidation thereof specifies that such local major - ity shareholders in the context of a joint venture company must manifest in the form of: • a national sea transportation company wholly owned by Indonesian citizens for commercial activities; and/or • Indonesian legal entities wholly owned by Indonesian citizens for non-commercial activi - ties, including social activities, tourism and sports.
While the above indicates that there is more of a restriction in place regarding the entity that can serve as the majority shareholder of a vessel- owning joint venture company, there is also a lack of clarity regarding which parties are expect - ed to engage in commercial or non-commercial activities and what these activities respective - ly entail. Therefore, it is yet to be affirmatively determined whether “commercial activities” or “non-commercial activities” refer to the activities of the majority shareholder of a vessel-owning company or to those of the vessel-owning joint venture company itself. Shareholding and Vessel Ownership Requirements for Shipping JV Companies The government of Indonesia recently enacted the Third Amendment to the Shipping Law, which introduces sweeping changes that reshape the regulatory landscape for Indonesian shipping joint ventures (ie, shipping companies estab - lished in Indonesia which have a foreign entity as a shareholder) (“Shipping JV”). A Shipping JV intending to own a vessel must now have a wholly Indonesian-owned shipping company as their majority shareholder. This new requirement effectively excludes Indonesian individuals and wholly Indonesian-owned non-shipping enti - ties from partnering with foreign entities to form Shipping JVs and holding the majority shares therein. The Third Amendment to the Shipping Law imposes further restrictions on foreign partici - pation by limiting shareholding in JVs to foreign shipping companies. The term “foreign ship - ping company” remains undefined, leaving its interpretation uncertain until implementing regu - lations are issued. However, it can be inferred that foreign shareholding in a Shipping JV (which must hold the minority stake in any event) is required to be held by an entity actively engaged
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