Indonesian Law

The Indonesian legal system is complex because it is a confluence of three distinct systems. Before the first Dutch traders and colonists arrived in the late 16th and early 17th centuries, indigenous kingdoms applied a system of ‘adat’ (customary) law. Three and a half centuries of Dutch presence, up to the end of the Second World War, then left a legacy of colonial law, some instruments of which are still applied today. After the proclamation of independence on 17 August 1945, Indonesian authorities set about building a national legal system on Indonesian precepts of law and justice.

The three strands — ‘adat’ law, Dutch colonial law and national law — coexist in the modern republic. Commercial law still rests in part on the Commercial Code of 1847 (Kitab Undang-Undang Hukum Dagang, or Wetboek van Koophandel), a colonial relic, but has been rewritten wholesale since independence, and more so in the 2020s than ever before: the 1995 Company Law gave way to the Limited Liability Company Law of 2007 (Law 40/2007), since amended by the Job Creation (Omnibus) Law, and the banking, capital-market and investment statutes were overhauled again by the 2023 Financial Sector Law. ‘Adat’ law is less conspicuous, though some of its principles — notably decision by consensus (‘musyawarah untuk mufakat’) — survive in modern legislation and in the informal, relationship-based way much Indonesian law is actually negotiated and applied.

Constitutional structure

Indonesia is a unitary republic established under the Constitution declared at independence, the 1945 Constitution (Undang-Undang Dasar 1945). Never amended in Soeharto's thirty-two years, it was amended four times between 1999 and 2002 after his resignation. Those amendments limited the powers and term of the President, devolved authority to the regions, and created new bodies including the Regional Representatives Council (Dewan Perwakilan Daerah, DPD) and the Constitutional Court (Mahkamah Konstitusi).

The most important legislative bodies are the People's Consultative Assembly (Majelis Permusyawaratan Rakyat, MPR) and the House of Representatives (Dewan Perwakilan Rakyat, DPR). The DPR — 580 seats since the 2024 election — is directly elected and holds the primary lawmaking role together with the President. The MPR comprises all DPR members plus the 152 DPD members, four from each of Indonesia's thirty-eight provinces (up from thirty-three after four new Papua provinces were created in 2022). The MPR alone may amend the Constitution, but since 2004 it no longer elects the President: the amendments of 2001–2002 introduced direct popular election of the President and Vice-President, capped at two consecutive five-year terms. Prabowo Subianto took office in October 2024.

Legislation

The categories and sources of Indonesian legislation are a genuine hurdle for the newcomer. The governing framework is no longer the August 2000 MPR resolution older texts cite, but a statute: Law 12/2011 on the Formation of Legislation, as amended by Law 13/2022. Its Article 7 sets the hierarchy, in descending order of authority:

1. 1945 Constitution (Undang-Undang Dasar 1945)
2. MPR Decree (Ketetapan MPR)
3. Law / Government Regulation in Lieu of Law (Undang-Undang / Peraturan Pemerintah Pengganti Undang-Undang, or Perppu)
4. Government Regulation (Peraturan Pemerintah)
5. Presidential Regulation (Peraturan Presiden)
6. Provincial Regional Regulation (Peraturan Daerah Provinsi)
7. Regency/City Regional Regulation (Peraturan Daerah Kabupaten/Kota)

The presidential-level instrument is now the Presidential Regulation (Perpres), not the older Presidential Decree (Keputusan Presiden), which today is a concrete administrative act rather than a source of general law. Article 8 further recognises ministerial, agency, Supreme Court and Bank Indonesia regulations as binding where a higher law mandates them — and much of the detail that affects residents and businesses lives in these lower instruments, not in the Laws themselves. Law 13/2022 also admitted the ‘omnibus’ method — amending dozens of statutes in a single act — used for both the Job Creation Law and the Financial Sector Law.

Once promulgated, legislation is published in the State Gazette (Lembaran Negara). Laws and Government Regulations carry an official Elucidation (Penjelasan), generally authoritative for interpretation.

Courts

The judiciary sits under the Supreme Court (Mahkamah Agung). Following the civil-law tradition of the Netherlands, Indonesian courts do not apply binding precedent as Common Law jurisdictions do.

Most disputes begin in the courts of general jurisdiction, the court of first instance being the State Court (Pengadilan Negeri); there are several hundred of these, each with its own territorial jurisdiction. Appeals go to the High Court (Pengadilan Tinggi), one in each province, and thence to the Supreme Court in Jakarta, which hears a final cassation appeal (‘kasasi’) and can order a case review (‘peninjauan kembali’) where, for example, new evidence emerges. Alongside these run specialised courts: the Commercial Court (Pengadilan Niaga, established 1998 for bankruptcy and insolvency); the State Administrative Court (Pengadilan Tata Usaha Negara) for cases against the government; and the Constitutional Court (Mahkamah Konstitusi), created by the 2001–2002 amendments, which rules on the constitutionality of legislation, election disputes and the removal of a President.

Government

Indonesia is divided into provinces, together with the special regions of Yogyakarta and Aceh and the Special Region of Jakarta. Each province has its own assembly (Dewan Perwakilan Rakyat Daerah, DPRD) and is headed by a Governor, now directly elected rather than centrally appointed. Regional autonomy legislation from 2000 onwards devolved substantial powers to regency and city governments, which employ most of the country's civil servants. The administrative tiers run:

Central government is run chiefly through ministries, called departments until 2008 and still loosely so named. Their internal structure runs:

The line-up of ministries changes with each administration. In November 2024 the former Ministry of Law and Human Rights was broken up into separate ministries for Law, for Human Rights, and for Immigration and Corrections — worth noting for anyone tracking who now issues a given regulation. Coordinating Ministers (Menteri Koordinator) oversee clusters of related portfolios, and several other office-holders carry ministerial rank, among them the Attorney General (Jaksa Agung).

Jakarta's own status is in transition. Law 3/2022 (amended by Law 21/2023) designates a new national capital, Nusantara (Ibu Kota Nusantara, IKN), in East Kalimantan, and Law 2/2024 (amended by Law 151/2024) reconstituted Jakarta as the Special Region of Jakarta (Daerah Khusus Jakarta, DKJ). The move is not complete: in May 2026 the Constitutional Court ruled that Jakarta legally remains the capital until the President issues a relocation decree (Keputusan Presiden), which had not been issued at the time of writing. Nusantara's executive district was finished in 2026; its legislative and judicial areas are targeted for 2030.

Legal professionals

There are three distinct kinds of legal professional: notaries, advocates and legal consultants. A notary (‘notaris’) is a legally trained, semi-public official appointed by the minister responsible for legal affairs to draw up and authenticate deeds (‘akta’) — a government appointee who nonetheless runs a private practice. A notary does not advise the parties, who are expected to have taken independent advice and agreed the substance of a deed beforehand; the notary is a neutral party who prepares, witnesses, authenticates and archives the signed original. Fees follow an official scale, though some matters are negotiable.

Advocates (‘pengacara’) are lawyers in private practice — the Indonesian counterpart of the attorney, or of the barrister and solicitor — and many focus on litigation. Legal consultants (‘konsultan hukum’) emerged from the late 1960s as foreign investment grew; most are also advocates but decline litigation, preferring corporate, commercial, banking and cross-border work, and many have trained abroad.

For foreign nationals setting up or running a company, the practical framework — the Job Creation Law's risk-based licensing through the Online Single Submission (OSS) system, the shift from a Negative to a Positive Investment List, current minimum-capital rules and the tax regime — is set out authoritatively on Okusi Associates' guide to Indonesian company establishment.

Researching Indonesian law

Anyone researching Indonesian law faces the same basic problem: sourcing the material. The core print source is the State Gazette and its sister publications, though these often run behind schedule, and books and journals vary in quality and are mostly in Indonesian — the largest obstacle for the foreign researcher. Online availability has improved considerably: government bodies publish key legislation in their fields, and the official portal peraturan.go.id now carries a large body of primary legislation. The best-established commercial service is hukumonline.com, once a donor-funded project and now a subscription-based company with extensive coverage and analysis.

One persistent limitation is that Indonesian legislation is published non-consolidated: an original statute and its later amendments appear as separate documents, leaving the reader to splice them together. That, the language barrier, and the sheer volume — Indonesia is a heavily regulated state, issuing thousands of central and regional instruments every year — make competent local advice, rather than self-directed research, the sensible course for most foreign residents.

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