INDONESIAN CONSTITUTIONAL COURT INTERPRETATION UPON STATE CONTROL: ASIAN VERSUS WESTERN IDEA
1Graduate School of International Cooperation Studies, Kobe University
2Center for Constitution and Laws Studies, Faculty of Law, University of Lampung
*Corresponding author: firstname.lastname@example.org
Formulation Article 33 of Indonesia 1945 Constitution was mainly influenced by the rejection of individualism as the symbol of capitalism and colonialism. It used to be associated with the authoritarian control of economic sphere. The problem remain is the limitation of state control set by constitution upon economic spheres. In the same time, model laws prescriptions from International Donor such as IMF and World Bank has largely support privatization in many areas of economic spheres under the name of legal and judicial reform. This paper is trying to answer this old debated issue through the cases review of Indonesian Constitutional Court judgments relating with the economic rights vide article 33 of Indonesia 1945 Constitution while in the same time giving recommendation upon the issue of legal and judicial assistance from International donors.
Keywords: constitutional rights, environment, social science, interpretation, law and development.
Indonesia inherited a complex legal system whose main component parts were western law, adat law, and Islamic law. In the same time, the legal system in Indonesia has been marked by the long struggle to construct a system based on the pattern of the family or community as set forth by the Constitution. This complex legal system basically features the special characteristic of Indonesia community and made the birth of unification supporters and legal pluralism supporters.
Amidst the desire to construct a strong unitary state, Seoepomo who was the great supporter of legal pluralism, however, was able to provide the basic provision in Indonesia 1945 Constitution to protect legal pluralism . It may be said that Indonesia 1945 Constitution greatly accommodated the law from the top and law from below but did not give the way to negotiate between the two. However, attachment to the traditional communal life conflicts with modernization and industrialization. Since that time, the legal pluralism versus unification became great national issue. This never-ending contest between legal pluralism and unification is not only happen in Indonesia but also happen across the world in Asia , Africa , and Latin America . Within the issue, old debated upon the interpretation of limitation of state control has not met the conclusion.
Asian Crisis 1997 witnessed the fall of New Order and the beginning of democratization in Indonesia followed by the historic amendment of Indonesia 1945 Constitution. This financial crisis marked the visible process of legal and judicial reform in Asia especially in South East Asia, these reforms mostly promoted by international agencies such as International Monetary Fund, Asian Development Bank, European Bank for Reconstruction and Development, and The World Bank. Most of these multilateral banks and donor agencies are involved in programs that fall within the broad notion of legal and judicial reform. It is widely known that the legal and judicial reform led by international agencies gives implication to the policy choice and legal design in the respective countries.
Asia and especially Indonesia worked closely with so many international donors in its development framework upon the legal and judicial reform. Within this so many international donors involvement, the engagement with legal transplantation pressure is evident. During that time, model laws mostly of American model were promoted and introduced in Asian countries backed by the academic justification under the name of legal transplantation and governance, several of those laws has become performance requirement for funding aid from those donors.
Though influential critics have shared a negative conclusion that the post-crisis legal reforms were unsuccessful, they often have not conducted careful analyses into the substance of legal policies contained in conditionality and model laws. Most observers have questioned the viability of the compulsory mode, rather than the substance, of the model laws being “transplanted” from developed countries to developing and/or transition countries. On the other hand, their counterparts from the law and economics schools have dealt with the substance of model laws, but they often lack rigorous comparative legal analyses. Various explanatory frameworks have been articulated by the law and economics school, including contingency theory, legal origins, new comparative economic systems, but the weak logic behind these frameworks reveals the political desire to justify model laws reflecting U.S. standards of deregulation or “new liberalism.”
In case of Indonesia legal and judicial reform assistance, the problem remain was the provision of state control in 1945 constitution before several judgment by constitutional court had not been addressed giving way for model laws supporting privatization signed by House of Representatives. Vacuum of legal interpretation upon the state control gave no direction of the legal and judicial reform direction giving a harsh way of such reform without considering the nation public law views.
In the other side, under the rule of law missionaries, constitutionalism has been spread around the globe aided by many international donors. Since 1990s, most Eastern European societies have taken significant steps to reform their legal system including rewritten constitutions even though the results are still questioned. Most Latin American governments have acknowledged the need for rule-of-law reform and are taking steps toward it, or at least proclaiming that they will. In Asia, constitutionalism has been a part of formalistic rule of law reform package primarily to support legal reform related to commercial affairs .
At the same time, the rise of constitutionalism is followed by the gradual emergence and expansion of new constitutional court in the world political system as the part of institutionalization of constitutional structure ; these new judicial powers have been responsible for translating the constitutional provisions into practical guidelines to be used in daily public life and have been famously recognized as guardian of constitution. Cappeletti  in this regard concludes that judicial review or constitutional review is the method for effectuating the positivization of higher values expressed by constitutions. In addition, constitutional court is one pillar of separation of powers theory.
In any case supremacy of constitutionalism and the rule of law would emerge if constitutional or judicial review through Constitutional Courts or Supreme Courts ensures that the constitution is followed. In addition, a strong Constitutional Court in newly democratic countries helps the state break with its authoritarian past and develops a constitutional culture in respective countries. Many of these courts have become significant, influential, well recognized, even powerful-actors. Gibson and Cadeira  emphasize South African Constitutional Court as defender of democracy in South Africa while Schwartz  concludes that the Constitutional Court in new democracies in East Europe such as Hungary and Poland as have been quite influential.
Despite one view that judicial review would be in subject to strong western influence and that it would be difficult to fit with Asia historical image of authoritarian regime, the emergence of constitutional and judicial review has been well recognized and documented by constitutional law scholar in this region . While Japan has maintained the successful image of constitutionalism in Asia, new breed of constitutional court in Thailand and Indonesia after 1997 turbulent political situation give other possible prospect for future legal reform and constitutionalism in the region .
Upon issues of liberalism under the name of free market, constitutionalism and the old debate of state control limitation, newly established constitutional court might mediate and find way to resolve the conflict and put fundamental legal basis for future conflict. It can be argued that the Indonesian Constitutional Court hailed as the guardian of constitution may set the limitation upon the old debate of state control vide article 33 of 1945 Indonesian Constitution. For this purpose of assessing the adjudicative function of the Indonesian constitutional court, this study will focus on the practice of constitutional interpretation, while identifying both the institutional characteristics and the socio-legal cultural conditions enabling such function. Within the issue of constitutional interpretation, this paper argue that the judicial reform initiated by the international donors such as IMF and World Bank clash with the people idea of economic sphere established in the 1945 Constitution, the judgment by the constitutional court shall confirm the issue.
WESTERN VERSUS ASIAN PERSPECTIVE
The basic outlines of neoliberal development policy since the establishment of Washington Consensus are now well known. Within economics, the lead passed from macroeconomic strategies to microeconomics. An economy was now imagined as a “market” in which individual economic actors transact one with another, responding to price signals and thereby allocating resources to their most productive use. Government is there less to manage the economy than to support market. This theoretical insight was understood to have quiet direct implication for policymakers. The basic idea was economic policy should enable rather than impede, market transaction. Government should do what is necessary to support a market pricing mechanism and avoid doing anything that would distort market prices .
At the National Level, the neoliberal policy agenda therefore began by dismantling the modest interventionist regimes that had been developed to pursue import substitution industrialization. Governments were encouraged to build down price distorting policies left over from their modest interventionist past and remove impediment to the penetration of national markets by the global economic forces. At the same time, government should encourage the emergence of private actors through privatization, promoting corporate law reform, strengthening the private banking sector, establishing more open and efficient financial market. The goal was to eliminate discretionary public administration and management of economic assets  or in David K Linnan word, the Washington Consensus de-emphasises state involvement in the economy which apparently disregard public law views of the state .
The 1997 Asian crisis was the gate for IMF and World Bank to give neoliberal reform prescriptions through conditionalities of restructuring of the corporate and financial sectors. As of 2004, The World Bank alone had sponsored as many as 600 projects of legal and judicial reform in over 100 countries . During the engagement with host country such as Indonesia, model laws were positively promoted by the IMF/World Bank in parallel with the conditionalities on such major economic law areas as insolvency law, secured transaction, competition law and corporate governance together with the model law which support for the privatization. The model laws notably in the area of privatization and financial sectors were the case law discussed in this paper covering the Electricity Law, Water Law, Oil and Gas Law, and Investment Law.
By Asian perspective, government involvement in the economic sphere and people welfare has been considered as the value of typical community people of Asian. Put some example of China, Korea, Singapore or even Indonesia itself. In case of Indonesia, the continental concept of rechtstaat and welfare state, meanwhile, emphasized the role of state in governing the state and community matters, however International Donor largely ignored this typical Asian Perspective. It shall be noted that China achieved highly economic growth without resorting much to International donor prescriptions, specifically upon the big bang privatization .
World Bank stated that the reform should come from within the country and responds to its specific needs . However the policy of legal and judicial reform by the Bank and IMF does not give the policy choices for borrowing countries to implement the their own model of legal and judicial reform since the reform should follow the specific models, thus the appropriate legal design which is suitable for each country characteristic will not be achieved. In latter of this paper we will see how Indonesian Constitutional Court response upon the prescriptions thorough its interpretation of Indonesian Constitution.
INDONESIAN CONSTITUTIONAL COURT
With the establishment of the Constitutional Court within the Constitutional System as part of the judicative power, two branches of judicial power under Supreme Court and Constitutional Court has been established in Indonesia. Constitutional adjudication in Indonesia follows the path of civil law pattern by establishing the centralized Kelsenian model of constitutional court outside of the regular judicial establishment. By this system, constitutional court is seen as the independent branch of judicial power beside the Supreme Court with different jurisdiction. As one pillar of judicial power, Indonesia Constitutional Court independency has been guaranteed by article 24 (1) of Indonesian 1945 Constitution.
Constitutional Court as part of the judicial control, base its judgment on the principles and values contained in the Constitution, as the basic norm at the top of the hierarchy. It has an important role in the efforts to uphold the Constitution and the Supremacy of law in accordance with its competence and jurisdiction. Its main function in to adjudicate constitutional cases in the framework of guarding the Constitution. So that it will be implemented responsibly according to the will of the people and ideals of democracy. Its existence is also expected to be able to safeguard a stable administration of government in the country.
Pursuant to Article 24C of the 1945 Constitution, the Constitutional Court has four authorities, namely:
- Conduct judicial review to ensure that laws are in compliance with the Constitution;
- Make decisions in disputes related to the authority of state agencies the authority of which bestowed by the Constitution;
- Make decisions on the dissolution of political parties; and
- Resolve disputes related to the results of general elections.
In addition to the above, the Constitutional Court is required to make decisions regarding House of Representative opinion concerning alleged violations committed by the President and/or the Vice President in an abdication under the 1945 Constitution.
The jurisdiction of Indonesian Constitutional Court of reviewing law is considered as abstract review. The abstract review allows for court proceedings that are concerned solely with the constitutionality of statutes, regardless of their application in an individual case. But still the petition shall show the relation upon how the constitutional right has been impaired by the law enactment. The jurisdiction does not involve concrete review arising from individual case as American experience or constitutional complaint as regularly conducted in Germany
After its establishment, Constitutional Court of Indonesia (MK) has recorded so many cases encompasses politically related case to constitutional rights related cases. Until the end beginning of 2010, the Constitutional Court had handled 238 constitutional review cases from 114 different laws. Many of the petitions for constitutional review were granted, which means that part of the law was unconstitutional. These constitutional reviews involving many kinds of constitutional review of law, most of them are very related with the breach of rights provision provided in constitution. This paper however concerning less to the constitutional rights related cases focusing on the economic rights set in article 33 of 1945 Constitution of Indonesia. The case reviews specifically take electricity law case, oil and mining law case, water law, and investment law.
In a landmark decision on 15 December 2004, the Indonesian Constitutional Court (MK) invalidates electricity law to unbundled and privatizes the country’s electricity system. The MK referred to international experience with privatization in rejecting the law, which they said would harm the country. This decision is important decision involving the long conflict between freedoms versus social or communal rights within Indonesia legal system. Furthermore, it has made clear interpretation of “controlled by the state” involving economic activity, considering that the constitutional provision in article 33 of Indonesia 1945 constitution used to be debated for its meaning before the establishment of constitutional court. The main issue in this constitutional review was whether the privatization regulated in the electricity law is considered as against the provision of article 33 of 1945 constitution.
In the other decision involving the economic rights, MK has passed a decision in a case of petition for constitutional review of the Law of the Republic of Indonesia Number 22 Year 2001 regarding Oil and Natural Gas against the 1945 Constitution of the State of the Republic of Indonesia on 15th December 2004 in its judgment No. 002/PUU-I/2003. MK in this decision had declared part of Law No. 22 of 2001, which gave full authority to enterprises to undertake exploration and exploitation of the Oil and Gas Sector and relinquish oil and gas price determination to the market’s mechanism, as contradictory to article 33 1945 Constitution. There were another judgment of water law and investment law judgment, which were very relating with the issue of limitation of control by state.
Electricity Law Case
The main issue in this constitutional review was whether the privatization regulated in the electricity law is considered as against the provision of article 33 of 1945 constitution. In its decision, the Court is of the opinion that the provision of Article 33 of the 1945 Constitution does not refuse privatization, as long as it does not abolish the control by the state to be the main factor in determining the policy of the enterprise in the production branches which are important to the state and/or which affect the livelihood of many people. The Court argued that the people through the Constitution had provided a mandate to the state to make policy, organize, regulate, manage and supervise to achieve maximum welfare for the people.
Court was considering in the beginning of the judgment that the provision of the 1945 Constitution that gives authority to the state to control production branches which are important for the state and which affect the livelihood of the public is not intended merely for the sake of the state’s authority alone, but is intended for the state to be able fulfill its obligations as mentioned in the Preamble to the 1945 Constitution, “…. to protect the entire Indonesian nation and the entire Indonesian motherland, and in order to promote general welfare…” and also “…creating social justice for all the people of Indonesia” . This is typical of civil law tradition of systematic interpretation that sees the whole unity of constitution as the fundamental basis for provision interpretation.
After taking the stance upon the systematical interpretation, ICC took the historical interpretation and original intent by citing Mohammad Hatta as one of the founding fathers definition of control by the state as follows: “The aspiration embedded in Article 33 of the 1945 Constitution is that massive productions whenever possible are conducted by the Government with the assistance of foreign capital loan. If this scheme does not succeed, it is also necessary to give opportunities to foreign businesses to invest in Indonesia with the requirements determined by the Government…Such is the way that we thought of how to carry out economic development on the basis of Article 33 of the 1945 Constitution…”
After taking so much time in provisional interpretation, Court was taking the fact consideration that competition and unbundling will only take place at JAMALI area (Java, Madura and Bali) as a market that has already been formed. Competition will be won by businesses that are financially and technologically solid, whereas areas outside Java, Madura and Bali whose market has not been formed will become the responsibility of the government to supply electricity in an integrated manner. This cannot be accomplished without cross subsidy from the profitable market at JAMALI. Therefore, the obligation to implement the greatest prosperity and welfare for all of the Indonesian people will not be achieved because private business players will be oriented to earn profit from market which has already been established. Court also took the consideration of fact given by expert presenting the empirical experience in Europe, Latin America, Korea and Mexico where electricity sector restructuring in fact was not beneficial and became a heavy burden for the state.
In its decision court was referring so many times to the concept of greatest prosperity and livelihood of many people basing its logic on the communitarian values within article 33 of 1945 Constitution. This interpretation may be reflected as MK stance favoring social rights and right to live upon freedom within the economic sphere. It should be noted that this interpretation is not reflecting ICC stance to reject the idea of liberty and freedom but more to idea that social rights and right to live will prevail against the freedom. Water law case will show that as long as the state can guarantee the social rights and right to live, the freedom will be constitutionally guaranteed.
Formulation Article 33 of Indonesia 1945 Constitution was mainly influenced by the rejection of individualism as the symbol of capitalism and colonialism. It used to be associated with the authoritarian control of economic sphere. Nevertheless this provision has been survived through the process of amendment, which means that the economist and the people itself have defended the principle of communitarian in the economic sphere. So the debate upon whether this provision is outdated or not shall not be the main issue here, but the debate shall be pointed more to the interpretation of Indonesia CC to the provision. This case has shown that the social rights or prosperity of the people are interpreted as the basic value of the provision of article 33 of 1945 constitution.
The idea to allow participation of business sector is one way to accommodate the balance between social rights and freedom rights and this is important for Indonesia since the case law of constitutional interpretation is still not abundant. It is worth to mention that Supreme Court of Japan has been supporting the idea of public welfare in its decision. Generally, the Japanese Supreme Court has utilized the public welfare doctrine to maintain a reasonable balance between the individual’s enjoyment of rights and freedoms and the well being of other individuals and of society itself .
The practice has been different in other countries, despite the open-ended wording of the constitutional catalogues of rights in Canada, New Zealand, Israel, and South Africa, the courts of all four countries tend to conceptualize the purpose of rights as protecting the private sphere (whether human or economic) from interference by the “collective” (often understood as the long arm of the encroaching state). The result is that the courts in these countries tend to regard state involvement as a major threat to human liberty .
Oil and Gas Law
MK in this decision had declared part of Law No. 22 of 2001, which gave full authority to enterprises to undertake exploration and exploitation of the Oil and Gas Sector and relinquish oil and gas price determination to the market’s mechanism, as contradictory to article 33 1945 Constitution.
However MK finds it evident that the arguments presented by the Petitioners are not sufficiently grounded, so that the law in its entirety is not proved to have been contradictory to the 1945 Constitution. The reason is that the substance of the state’s control appears to be sufficiently clear in the reasoning of the quo law both in upstream and in downstream sectors. The most important feature in the oil and gas constitutional review is that the MK considers the Oil and Gas Sector as a production branch important to the State and pivotal to the lives of the people, so the control over production branch shall be in the hand of government. Private entities may participate as government partner thorough contract concession.
MK mentioned that the matter is different from the Electrical Law that has been reviewed by the Court with the Decision for Case Number 001-021-022/PUUI/ where its reasoning on the intended control by the state principle does not appear to by clearly described in the Articles of the aforementioned Electrical Power Law which should have been the first and foremost reference in accordance to the mandate of Article 33 of the 1945 constitution.
It is important to note that the Government in its answer put emphasis on the minority people saying that Article 33 Paragraph (2) of the 1945 Constitution provides that Production branches which are important for the state and which affect the livelihood of the public shall be controlled by the state. Its further reminds that the control over productions shall in no way fall into the hands of individuals or groups in power and the people at large will be oppressed by them. Having power refers not only to political power but also economic power through their power in controlling the market and production factors.
The interpretation of court in this case fundamentally is in the same nature with the interpretation in the electricity case. It seems that government has anticipated the problem of privatization in the law making process by introducing the system that gives the participation of government within the concept of “controlled by the state”.
In the Water Law case (MK Decision 058-059-060-063/2004 and 008/2005), almost 3,000 individuals and several NGOs requested the MK to review Water Law No. 7 Year 2004. A majority of the MK upheld the constitutionality of the Law, largely because the MK believed that under it the state retained control over the natural resources. The interpretation of the case is in the same nature of two cases beforehand. By this judgment, MK has been set a limitation for future case relating with the control of state.
These judgments confirm Dworkin theory on law as integrity . With these judgments, MK has been consistent on the interpretation of article 33 of Indonesia 1945 Constitution. Law as integrity as Dworkin said aims to show law in its best light by viewing past institutional decisions as embodying a morally coherent scheme of principles, so far as possible, and by following those principles in resolving current and future disputes. In the electricity law case, MK has put principle of “controlled by state” and allows the participation of investor to the important sector as long as the state still retained control over the sector. Underlying principle is the protection of welfare right of Indonesia people over the peril of absolute ownership by private sector.
Investment Law Case
Indonesian Constitutional Court has declared their final decision for the Investment Law (UUPM) or Law No. 25/2007. The decision is to granting part of sue made by the people joined in Gerak Lawan (People’s Movement Against Neo-colonialism and Imperialism). The lawsuit material that is being granted is only regarding article 22, which stated about granting land facility for investors. According to UUPM, article 22 guarantee investors to receive and extend ahead Right of Tenure for 95 years, right to build for 80 years and right to Use for 70 years.
The Constitutional Court considered the article to be unconstitutional. The reason is that article considered to be contradictive with 1945 Indonesian Constitution (UUD 1945) article 33 point 3, which explain state ownership’s right and the people’s economic principle. In the end, the words that refer to land facility extension for the investors “ahead” is eliminate. Although, Right of Tenure, Right to build, and Right to Use can still be extended by investors referring to the next article.
Investment Law case is another novel chain as Dworkin champion, MK put once chapter of principle in the electricity law case, next chapter following the established principle in the electricity case, ICC put another story in the water law case, and still following the chain story upheld the principle in the Investment Law case. By this case, interpretation of article 33 of Indonesia 1945 constitution has found its moral value. So the MK in the next shall ground its judgment following the established moral value. Indonesia’s highly respected constitutional scholar Asshiddiqie in his newly book Konstitusi Ekonomi has firmly suggested the constitutional scholarship to always use moral reading for Indonesia constitutional provision interpretation . Thus, it will be worth to see future trends upon the interpretation of article 33 of Indonesia 1945 Constitution.
Moral Value of Control by State under 1945 Constitution
The cases reviews above have shown the natures of control by state vide article 33 of 1945 constitution. There are two important limitations have been established by MK so far for the future references of legal and judicial reform by government and international donor. The first one is that control by state means that government shall have involvement over the important branch of economic resources so that the welfare of the people can be guaranteed. By this limitation, privatization upon the important branch of economic resources shall be regarded as against constitution; the second one is that the management of economic resources by the government shall be directed to the prosperity of the people. By this limitation, the government shall protect the weak people from the evil side of neo liberalism rather than giving full freedom of economic activity. These two limitations are moral values that shall be taken into account in every government policy and international donor assistances upon economic resources.
Over 2000 years ago, Zhuang Zhi described two kinds of birds: those who flew high and saw a large part of the world but knew little in detail, and those that hopped along the ground and knew much about one small corner of the world. The legal and judicial reform thus shall be seen from the respective countries and shall be directed together in achieving the same vision of legal reform. Article 33 of 1945 Constitution, despite having critic’s of impeding the economic activity because it provision of state control upon important branch of economic activity, the article is the vox populi of Indonesian people. Therefore the limitation established by Constitutional Court interpretation shall be respected and become the basic guidance in legal and judicial reform.
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