The two landmark graft cases of Karen Agustiawan show that anything bad can happen to any investor dealing with state-owned enterprises or regional governments.
earing about the lack of legal certainty in Indonesia is like listening to a broken record. It continues to pose significant challenges for both individuals and businesses.
The recent controversial court case of Karen Agustiawan, the former president director of state-owned oil and gas company Pertamina who has just been jailed again on her second corruption case, pending the final outcome of the appeal, is the culmination of why Indonesia faces a long flight of steep steps toward legal certainty, even for domestic investors, let alone foreign investors.
Consistency remains the main missing ingredient in the petri dish of the Indonesian legal system, especially in court decisions. Where a legal principle derived from a binding and final court decision, whether in the civil, commercial or criminal court, may not be followed by judges in subsequent cases on the same merits.
In Karen's first case, as prosecuted by the Attorney General's Office (AGO), she was found guilty of corruption for abusing her position as president director to decide on an oil investment in Australia that caused losses to Pertamina that were considered state losses. The district court and the high court imprisoned her until the ruling was rightfully overturned by the Supreme Court in March 2020, which found that the case was only a civil case.
It was argued that the "loss" experienced by PT Pertamina Hulu Energi, a subsidiary of Pertamina, was actually depreciation (impairment), which is a corporate action involving the decrease in the value of assets that are fluctuating in nature, and not a real corporate loss as mentioned in the Supreme Court decision. There was no self-enrichment or bribery as alleged by the prosecutor.
In Karen's second case, prosecuted by the Corruption Eradication Commission (KPK), she was found guilty by the Corruption Court and sentenced to nine years of imprisonment. This case was controversial because she was not sentenced to pay any restitution to the state because no funds were received from the LNG procurement. The court found that there was no self-enrichment, no abuse of power and no conflict of interest.
The two landmark cases above only show that anything bad can happen to any investor dealing with state-owned enterprises or regional governments.
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