President Joko “Jokowi” Widodo has signed Law No. 11/2020 on job creation, which caused controversy among many groups within Indonesian society, including investors, legal practitioners, NGOs, academics and scholars.
However, despite the negative views and reactions, the enactment of the Job Creation Law is aimed at spurring national investment development, including in the shipping industry. While not comprehensive, the law has made several amendments to the provisions of Shipping Law No. 17/2008, including changes to the wreck removal obligation of ship owners in Indonesian territorial waters.
As a general practice in the shipping industry, sunken shipwrecks and/or cargo in a busy shipping lane may compromise sailing safety. Therefore, to avoid potential incidents, ship owners are obliged to lift or salvage their sunken shipwreck and/or cargo, which is usually done through the service of a salvage company. Aware of the high cost of wreck removal, the Transportation Ministry regulates further obligation to the ship owners to subscribe to a wreck removal insurance and/or protection and indemnity insurance.
As an effort to enforce the obligation of sunken shipwreck and/or cargo removal within Indonesian waters, the government, through the Job Creation Law, has increased the penalty for ship owners that do not perform their obligation to remove their sunken shipwreck and/or cargo.
By comparison, according to the previous applicable regulation, i.e. the Shipping Law, ship owners that do not remove their sunken shipwreck and/or cargo that is deemed harmful to navigation, within a maximum period of 180 calendar days since the sinking of the ship and/or cargo, shall be subject to imprisonment of up to one year and a maximum fine of Rp 200 million (US$14,000).
Meanwhile, the amendment made under the Job Creation Law imposes a higher penalty for ship owners that do not remove sunken shipwrecks and/or cargo, namely a maximum fine of Rp 10 billion ($705,642) and the same one year maximum imprisonment.
However, there is another crucial addition that was made through the Job Creation Law. In order for the aforementioned penalties to apply, shipwrecks and/or cargo should not only compromise the safety and security of shipping, but must also result in casualty or ship accidents.
The implication of the aforementioned prerequisite seems to allow ship owners to forego salvaging their sunken shipwreck and/or cargo within a maximum period of the required period of time (180 calendar days), as long as there is no casualty or ship accident stemming from their sunken shipwreck and/or cargo.
There are several issues that may potentially arise in the future as a result of the ambiguity of such a penalty provision.
Firstly, compared with the previous regulation, the current penalty under the Job Creation Law tends to be more lenient as the fine and imprisonment may only be imposed when there is already a victim or ship accident. Whereas, in principle, the primary objective of a sunken shipwreck and/or cargo removal is to ensure safety of the shipping lane in order to prevent further vessel-related accidents.
The previous penalty provision under the Shipping Law may be deemed as more ideal for serving the interest of ensuring the safety of shipping and navigation. This is considering that under the Shipping Law, ship owners are required to remove their sunken shipwreck and/or cargo within a certain period of time, regardless of association with or occurrence of a casualty or shipping accident.
Further, if the penalty can only be imposed after the shipwreck causes an accident or casualty, this opens the possibility for the shipwreck not to be removed based on the argument that it was not directly caused by the sunken shipwreck and/or cargo but by the vessel’s unseaworthiness or the vessel master’s negligence. Such lighter penalty may lessen the urgency on the part of ship owners to enter into shipwreck removal insurance.
Legally speaking, under Indonesian law, it is mandatory for ship owners to have shipwreck removal insurance, including foreign ship owners that pass through Indonesian waters. In principle, considering the expensive costs that may be spent on shipwreck and/or cargo removal, this insurance is designed to ensure that ship owners perform their obligation to remove their shipwreck and/or cargo.
Secondly, penalty enforcement under the Job Creation Law is uncertain. Previously, under the Shipping Law, the government may be able to simply impose fines against ship owners that have not removed their sunken shipwreck and/or cargo within the required period.
Meanwhile, the Job Creation Law requires an additional condition for the punishment of a ship owner, namely that a ship accident or casualty was inflicted by the sunken shipwreck and/or cargo within the required period. This may be further interpreted that after 180 calendar days, the ship owner may no longer be responsible for that accident or casualty.
Moreover, there is no clear provision on how the victim or the party experiencing the accident will pursue compensation from the ship owner in relation to sustained damages.
It can be concluded that the current amendment is counterproductive to ensuring the safety of shipping and navigation, as the addition of “causing casualty or ship accident” would cause uncertainties in the imposition of penalties. Therefore, a further implementing regulation of the Job Creation Law is urgently required to ensure the proper implementation of the penalty enforcement mechanism against ship owners. Such regulations may even clarify how the injured party from the accident associated with the shipwreck and/or sunken cargo is compensated. All in all, the implementing regulation will determine the extent of the government’s efforts in establishing safe shipping lanes in Indonesia.
The authors are lawyers in shipping and international trade (customs and excise), aviation, insurance and reinsurance at Budidjaja International Lawyers. The views expressed are their own.
Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.