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ECONOMIC REFORM WHEN THE CONSTITUTION MATTERS: INDONESIA'S CONSTITUTIONAL COURT AND ARTICLE 33

2008; Taylor & Francis; Volume: 44; Issue: 2 Linguagem: Inglês

10.1080/00074910802169004

1472-7234

Simon Butt, Tim Lindsey,

Legal and Policy Analysis in Indonesia

Abstract Article 33 of Indonesia's Constitution requires the state to ‘control’ important branches of production and natural resources. The meaning of ‘control’ has been a matter of significant debate since Indonesia's independence: does it require the state to manage directly, or is regulation enough? The government has recently sought to break down government monopolies and attract private investment in key sectors. To this end it has enacted a raft of new statutes, but they have been challenged in Indonesia's new Constitutional Court. The Court has opted for the ‘direct manage ment’ interpretation of article 33, striking down statutes that implicitly interpret it as requiring government regulation only. This paper discusses these decisions and, more broadly, problems arising from judicial intervention in economic policy formation. It also considers how the government has sought to circumvent the decisions, and the possible consequences of state non-compliance for the Court's future. Notes 1For details of these amendments and the text of the Constitution before and after the amendments, see Lindsey (Citation2002): 244–301), on which this and the following paragraph draw. 2Article 20 now provides that bills come into force automatically 30 days after being passed by the DPR, even if the president does not endorse them. 3Transitional Provisions, art. III: ‘The Constitutional Court shall be formed at the latest by 17 August 2003 and before its formation its authority shall be exercised in full by the Supreme Court’. Although the Supreme Court (Mahkamah Agung, MA) was required to exercise the jurisdiction of the Constitutional Court until the latter was established, in practice, cases were registered with the Supreme Court but it did not hear or decide any of them. The Supreme Court simply transferred all these cases to the Constitutional Court upon its establishment; for details, see Lindsey (Citation2002). On the Supreme Court generally, see Pompe (Citation2005). 4Article 24C(5) of the Constitution provides that MK judges must have high levels of integrity, be of impeccable character, be fair and just, have a complete understanding of constitutional and administrative law, and not hold government office. The MK consists of nine judges. The DPR, the president and the Supreme Court put forward three candidates each (art. 24C(3); MK Law art. 4(1). The nine judges can serve a maximum of two five-year terms. They elect from among their number a chief and deputy chief justice (art. 24C(4); MK Law art. 4(2)), who can hold office for three years (MK Law art. 4(2)). (Unless otherwise stated, all references to ‘articles’ are references to articles of the 1945 Constitution of the Republic of Indonesia as amended.) 5Confusingly, the term ‘judicial review’ is often used in Indonesia as an English translation of peninjauan kembali, the final stage of appeal in the Supreme Court. Peninjauan kembali (PK) literally means ‘reconsideration’, and refers to a review on the papers of a Cassation (a form of appeal) decision of the Supreme Court by a different panel of judges within the same Court. The PK is the final level of ‘appeal’ in the Supreme Court. 6The final two paragraphs of article 33 – less important for the purpose of this article – are as follows: 1. The national economy is to be run on the basis of economic democracy, and the principles of togetherness, efficient justice, sustainability, environmentalism, and independence, with a balance between advancement and national economic unity. 2. Further provisions to implement this provision will be legislated. The MK publishes its decisions at and in hard copy. In this paper we refer to the soft-copy versions, as found on the website. 8Two MK judges dissented, however (Hukumonline Citation2005c). 9The SDA Law case was 132,186 words, the Electricity Law case was 89,335 words and the Migas Law case was 55,683 words. 10The full text of the preamble is as follows (we have italicised the words of the Pancasila state ideology). ‘Whereas freedom is the inalienable right of all nations, colonialism must be abolished in this world as it is not in conformity with humanity and justice. And the moment of rejoicing has arrived in the struggle of the Indonesian freedom movement to guide the people safely and well to the threshold of the independence of the state of Indonesia, which shall be free, united, sovereign, just and prosperous. By the grace of God Almighty and impelled by the noble desire to live a free national life, the people of Indonesia hereby declare their independence. Subsequent thereto, to form a government of the state of Indonesia which shall protect all the people of Indonesia and their entire native land, and in order to improve the public welfare, to advance the intellectual life of the people and to contribute to the establishment of a world order based on freedom, abiding peace and social justice, the national independence of Indonesia shall be formulated into a Constitution of the sovereign Republic of Indonesia which is based on belief in One Almighty God, just and civilised humanity, the unity of Indonesia, democracy guided by the inner wisdom of deliberations among representatives and the realisation of social justice for all of the people of Indonesia.’ 11Some commentators have gone so far as to suggest that this new right was introduced by the World Bank (Hukumonline Citation2003b). As one legislator said during the DPR debates over the SDA Law, ‘Even the Dutch recognised water as a resource owned by the people’ (Estananto Citation2004). 12While private power companies existed in Indonesia before 2002, most had exclusive power purchase agreements with the state-owned PLN (see, for example, Hall and Lobina Citation2004). 13The first applicant alleged that its rights under articles 1(3), 28C(2), 28D(1), 28H(1), 33(2) and 33(3) of the Constitution had been damaged; the second applicant alleged a breach of articles 27(2), 28D(2), 28H(1), 28H(3), 33(3) and 54(3); and the third applicant claimed that its article 28A, 28C(1) and 28H(1) rights had been breached. 14Indeed, a government expert argued that PLN was incapable of meeting demand for electricity, despite the latter's ‘being second only to food in importance to human life’ (ELC Citation2003: 339–40). 15The Court did not, however, go so far as to invalidate contracts or licences signed or issued under the Law, allowing them to continue until they expired. 16David Hall, Director of Public Services, International Research Unit, University of Greenwich, London. 17The full passage in Stiglitz's Globalisation and Its Discontents reads: ‘The IMF's policies, in part based on the outworn presumption that markets, by themselves, lead to efficient outcomes, failed to allow for desirable government interventions in the market, measures which can guide economic growth and make everyone better off.’ 18The MK stated (ELC Citation2003: 330) that any such take-overs must be carried out in accordance with just laws. 19Similar comments were made in the Migas Law case (MLC Citation2003: 210–11). 20The Elucidation is the formal explanatory memorandum that accompanies most Indonesian regulations and is often read as if it were part of the regulation itself. The Elucidation to the 1945 Constitution has always been controversial, however, because, when the Constitution officially came into force on 18 August 1945, the Elucidation was not included. It was promulgated in the Government Gazette in 1946. 21The electricity price rises were in fact introduced via Presidential Regulation 55/2005 (Hukumonline Citation2005d), and hence were not subject to review by the MK. 22The World Bank is said to have made the Water Resource Sector Adjustment Loan (WASTAL) contingent upon the DPR's enactment of the SDA Law (Hukumonline Citation2003c; Sekitarkita, no date; Wahli 2003, Wahli Citation2004b, Citationc). 23Government of Indonesia, letter of intent to the IMF, 16 March 1999, available at . 24The MK's invalidation of the Electricity Law is, however, mentioned in passing in the Elucidation to the Regulation. 25Personal communication with Fultoni, Secretary of the National Legal Reform Consortium (Konsorsium Reformasi Hukum Nasional, KRHN), 8 May 2005; see also Hukumonline (Citation2005e). 26At the time of writing, an application had been lodged with the MA to review Government Regulation 3/2005, but it had not been decided (Hukumonline Citation2005e; see also Bedner Citation2003). 27Under the New Order, prohibitions on judicial review were contained in MPRS (Provisional People's Consultative Assembly) Decree No. III/MPR/1978 concerning the Position and Working Relationship between the Highest State Institution and Superior State Institutions, art. 11; Law 14/1970 on Judicial Power, art. 26(1); Law 2/1985 on the Supreme Court, art. 31(3). On the history of the Supreme Court during the New Order, see Pompe (Citation2005).