Introduction
The Government has publicly shared the Draft Presidential Regulation on Legal Compliance in the Drafting of Laws and Implementation of Laws and Regulations (the “Draft”). The Draft regulates compliance towards the implementation of laws and regulations by legal entities and business entities by requiring a legal audit to be conducted annually.

This draft requires legal entities and business entities to participate and implement efforts to increase awareness and compliance and improve the effectiveness of legal implementation by conducting an assessment of1:

  1. legal substance, legal structure, and legal culture; and
  2. awareness and compliance with the implementation of the law.


Monitoring and Evaluation
Assessment of the substance of law, legal structure, and legal culture as referred to in point (i) will be carried out by the Minister of Law by conducting monitoring and evaluation2, which is an assessment of the substance of the applicable law both written and unwritten law, including an assessment of institutions, legal structure, and legal culture3. The Minister of Law will issue opinions and recommendations as the result of monitoring and evaluation, which must be implemented by legal entities and business entities. This monitoring and evaluation are intended to ensure that the legal substance, legal structure, and legal culture are in accordance with Pancasila, the 1945 Constitution of the Republic of Indonesia, and legal principles4. Further provisions relating to this monitoring and evaluation will be regulated in a Minister of Law Regulation.


Legal Audit
Assessment of awareness and compliance with the implementation of the law for legal entities and business entities as referred to in point (ii) is carried out by conducting a legal audit, annually5, conducted by a legal auditor which has been certified by the Minister of Law6. In the event that legal entities and business entities do not perform their legal audit obligations and/or there are any reports in this regard, the Minister of Law will assign a legal auditor to conduct a legal audit of the legal entities and business entities7.

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The legal audit is conducted through the following stages8:

  1. identification of the objectives of the legal audit assignment;
  2. legal audit planning;
  3. confirmation of legal audit planning;
  4. collection of data and information;
  5. assessment and analysis of data and information;
  6. preparation of legal audit report; and
  7. submission of legal audit results.

Legal Audit Sanction
Legal entities and business entities must also report the results of the legal audit and implement the recommendations of the legal audit and report its implementation to: (i) the Minister of Law; and (ii) the relevant Minister or Head of Institution (e.g., minister or head of institution that issues business license to the legal entity or business entity)9. Legal entities and business entities that do not report the results of the legal audit and implement the recommendations of the legal audit and report its implementation shall be imposed with sanctions. The sanctions are unclear, as the Draft refers only to the relevant laws and regulations10. Furthermore, provisions related to the procedures for conducting legal audits, submitting legal audit results, and implementation of recommendations from legal audit results will be further regulated through Ministry of Law regulations.

Closing
To date, this draft is still in the process of harmonization11. This draft is a step by the government to enhance legal awareness and compliance in Indonesia. The mandatory legal audit conducted annually is expected to ensure that legal entities and business entities conduct their activities in accordance with the applicable laws and regulations. Further provisions on the procedures for conducting legal audits through regulations of the Minister of Law will be an important factor in ensuring that this Draft can be implemented effectively and optimally after it is promulgated.

Ardelia Ignatius

Sources

  1. Article 9 the Draft Presidential Regulation on Legal Compliance in the Drafting of Laws and Implementation of Laws and Regulations (the “Draft”).
  2. Article 10 paragraph (1) of the Draft.
  3. Article 1 number 6 of the Draft.
  4. Article 10 paragraph (2) of the Draft.
  5. Article 12 paragraph (1) of the Draft.
  6. Article 12 paragraph (1) and Article 1 number 8 of the Draft.
  7. Article 12 paragraph (3) of the Draft.
  8. Article 12 paragraph (2) of the Draft.
  9. Article 12 paragraph (8) and (9) of the Draft.
  10. Article 12 paragraph (7) of the Draft.
  11. https://partisipasiku.bphn.go.id/program-legislasi/draft/685-rancangan-peraturan-presiden-tentang-program-penyusunan-monitoring-dan-evaluasi-serta-kepatuhan-hukum-dalam-pembentukan-peraturan-perundang-undangan-di-lingkungan-kementerian-lembaga-dan-pemerintah-daerah accessed on 7 January 2025.
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