Forest degradation in Indonesia has caused real and devastating impacts on people’s lives, particularly in regions where large-scale industrial activities operate within forest areas. The recent floods and landslides in Sumatra have brought public attention to a critical question: when environmental damage is caused by many actors, how should responsibility and liability be determined?
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Forest Degradation in Indonesia
Referring to the Elucidation of Article 50 paragraph (1) of Law Number 41 of 1999 on Forestry, as amended by Law Number 6 of 2023 on the Enactment of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law (“Forestry Law”), it is stated that forest destruction is:
“… the occurrence of changes in physical conditions, physical characteristics, or biological elements, which cause the forest to be disturbed or unable to function in accordance with its designated purpose.”
In December 2025, the Minister of Forestry stated that Indonesia’s deforestation rate was recorded at 166.450 hectares during the period from January to September 2025, which represents an increase of 28% from 2020. Furthermore, based on the Forest Declaration Assessment 2025 report, issued in October 2025, it was stated that the deforestation rate in Indonesia has continued to rise. Nevertheless, in contrast to deforestation occurring in the previous years, it should be noted that this report highlighted that the renewed increase in deforestation was largely due to activities and land concessions that were categorized as legally valid, which possess official permits in their operations.
It is undeniable that forest degradation in Indonesia has intensified, along with the growing industrial and economic activities. This development reflects the central role of forest as a vital component of Indonesia’s natural wealth. However, while the availability of natural resources may indeed facilitate industrial and economic growth, this condition has, on the other hand, been exploited by large-scale industries, resulting in an excessive resource extraction, ultimately causing a widespread forest destruction.
These continuous occurrences of forest destruction have led to real and far-reaching consequences that are directly affecting the people. One concrete consequence recently, reflecting this matter is the flash floods and landslides in Sumatra occurring in late 2025. Whereas as of 12 January 2026, based on data from the National Disaster Management Agency (“Badan Nasional Penanggulangan Bencana/BNPB”), this large-scale disaster has claimed 1.180 lives, with a further 145 individuals still reported missing.
While the government initially framed Tropical Cyclone Senyar as the primary cause of this disaster, however it should remain undeniable that, by taking into account the factual occurrence, the severity of the disaster has been driven by the long-standing forest degradation in Sumatra. The extensive range of industrial activities by large corporations within the Sumatra Forest areas, including logging, land clearing, land burning, as well as plantation, mining, and various infrastructure projects such as Hydroelectric Power Plant, has potentially and significantly contributed to this occurring disaster. These activities have potentially deprived the forests in Sumatra, unable to perform their essential ecological functions.
Today, with the severe impact of flash floods and landslides, it is only natural for the public to urge the government and other relevant stakeholders, to assume responsibility for the environmental degradation and the disasters that have caused such substantial losses, especially to the affected communities.
Undoubtedly, multiple parties must be held accountable, ranging from the government to, in particular, the large corporations that conduct industrial activities within these forest areas. Nevertheless, when we are now faced with a condition in which such a large number of industrial activities are carried out in forest areas by those large companies, it becomes a question of how one can determine who is truly responsible and who should then be held accountable for such enormous losses.
While the availability of natural resources may indeed facilitate industrial and economic growth, this condition has, on the other hand, been exploited by large-scale industries, resulting in an excessive resource extraction, ultimately causing a widespread forest destruction.
Liability in Forest Degradation
Each year, industrial activities in the Sumatra Forest areas are likely to increase. Hundreds of thousands of hectares of primary forests have been steadily diminished as a result of land-use conversion, starting from oil palm plantations, mining concessions, hydroelectric power projects, along with other industrial facilities such as pulp and paper production. These ongoing activities have likely led to the persistent occurrence of forests destruction.
Forest destruction is defined under Article 1 number 3 of Law Number 18 of 2013 on the Prevention and Eradication of Forest Destruction, as amended by Law Number 6 of 2023 on the Enactment of Government Regulation in Lieu of Law Number 2 of 2023 on Job Creation into Law (“Law 18/2023”) as the process, manner, or act of damaging forests through illegal logging, the use of forest areas without authorization, or the use of permits in a manner inconsistent with the purposes and objectives for which such permits were granted, within forest areas that have been designated, appointed, or are in the process of designation by the government.
As previously noted, forest degradation is not caused solely by illegal activities, but also occurs within business operations that have, in fact, obtained official permits. This is evident by how, in the recent floods in Sumatra, there are a lot of indications showing that large quantities of logs were carried away by the floodwaters, are logs that clearly originated from forest concessions operating in the area, some which are operating under a valid permit. This situation demonstrates that the granting of permits does not necessarily imply the effective protection of forests. Whereas in fact, Article 50 paragraph (1) of the Forestry Law has clearly stipulated that:
“Any person who has been granted a Business Permit in a Forest Area is prohibited from conducting activities that cause damage to the Forest.”
Regarding the provisions above, when referring to the floods and landslides currently affecting Sumatra, public calls for accountability have intensified not only toward the government, but also toward the corporations that conduct business activities in forest areas. Given the broad scale of this disaster, which also has affected a wide geographical area, identifying which companies to bear actual liability and holding them accountable presents a serious challenge.
The doctrine of market share liability, facilitates the imposition of liability for damages based on the respective market shares of the parties whose activities have contributed to the harm.
Market Share Liability Doctrine as a Determinant of Liability
In addition to determining which parties should be held responsible, the next question remains is how to determine, as to what extent does each of the alleged companies contributed to the losses incurred. In the event of environmental losses and damages where numerous parties are alleged of having contributed to the resulting damage, determining on who should become liable becomes particularly challenging. Especially, given that the conventional concept of liability in general, which requires proof that a specific party, is indeed directly and clearly committed the harmful act in question. In the face of such uncertainty, there is actually a legal doctrine that has, in fact, may address this challenge. One such doctrine is the market share liability.
Market share liability is a legal doctrine that emerged and has been developed primarily within common law jurisdictions. Over time, this doctrine is often applied in cases seeking to impose liability in circumstances where the actual party responsible for the harm cannot be identified specifically. The doctrine of market share liability, essentially, facilitates the imposition of liability for damages based on the respective market shares of the parties whose activities have contributed to the harm, even in the absence of proof that the loss was caused by the specific conduct of any parties. In this way, responsibility is distributed proportionally among actors who collectively created the risk that ultimately materialized into damage.
This theory was first introduced through Sindell v. Abbott Laboratories, which subsequently became a jurisprudence and precedent for the application of the market share liability doctrine in various liability cases, particularly in the United States.
Under market share liability the burden shifts to the defendants, who must demonstrate that they were not responsible for the injury suffered by the plaintiff.
Sindell v. Abbott Laboratoris
The doctrine of market share liability was first introduced through the case of Sindell v. Abbott Laboratories in 1980 in the United States. In this case, the plaintiff essentially argues that the defendants, that their mothers’ consumption of a particular drug during pregnancy had caused them to develop cancer during their early puberty. The drug in question was diethylstilbestrol (“DES”), which was originally consumed to prevent miscarriage and other pregnancy-related complications.
However, what is interesting in this case is that the main difficulty faced by the plaintiffs was their inability to identify the specific manufacturer that had produced the DES consumed by their mothers. Moreover, this problem was further complicated by the fact that the lawsuit was filed many years after the drug had been taken. Initially, the plaintiffs brought their claims against ten pharmaceutical companies, even though, at the relevant time, approximately 200 manufacturers were marketing DES. Therefore, under such circumstances, it was practically impossible for the plaintiffs to determine which particular company had manufactured and distributed the precise product that allegedly caused their injuries.
At first instance, the court dismissed the claims on the ground that the plaintiffs had failed to establish that any of the defendants was the actual manufacturer of the drug ingested by their mothers. The plaintiffs subsequently appealed the decision, where the California Supreme Court adopted what later became known as the doctrine of market share liability. Under this approach, the burden of proof shifts to the defendants, who must demonstrate that they did not manufacture the DES consumed by the plaintiff’s mother, provided that the plaintiff has joined a substantial share of the relevant manufacturers in the lawsuit.
The Court reasoned that, in cases where a plaintiff cannot identify the specific manufacturer of a harmful product, a modification of traditional liability principles is justified in order to prevent the imposition of an unfair evidentiary burden on the injured party. The Court emphasized that all defendants had produced DES according to the same formula and marketed it interchangeably, thereby creating structural obstacles for plaintiffs seeking to identify the exact source of the drug.
By applying market share liability doctrine, the Court concluded that each DES manufacturer could be held liable for a proportion of the damages corresponding to its market share at the time the plaintiff’s mother was pregnant. Consequently, even manufacturers that, in fact, did not produce the exact DES ingested by the plaintiff’s mother could still be held liable, based solely on the size of their market share during the relevant period.
Thus, the application of market share liability fundamentally alters the conventional allocation of the burden of proof. Under ordinary principles of liability, it becomes the burden upon the plaintiff to identify the responsible party and to prove that the defendant caused the alleged harm. Under market share liability, however, this burden shifts to the defendants, who must demonstrate that they were not responsible for the injury suffered by the plaintiff. Only if a defendant succeeds in doing so may it be exempted from liability for damages under this doctrine.
The market share liability doctrine is indeed suitable to be implemented in environmental cases, where it is often difficult to determine which party is truly responsible for the environmental damage that has occurred.
Market Share Liability in Environmental Cases in Indonesia
While the doctrine of market share liability has long been recognized as an established doctrine and a persuasive precedent in liability cases, particularly in common law jurisdictions, its application remains relatively uncommon in Indonesia. Even though, when considering its implementation, this doctrine offers an easier method for determining liability in situations where it is difficult to identify the party that is indeed at fault. In this regard, market share liability serves not only to facilitate the attribution of responsibility, but also helps to ensure that the victims obtain compensation for the losses they have suffered.
Despite the absence of statutory provision in Indonesia that explicitly regulates and recognizes the doctrine of market share liability, in fact there are existing laws and regulations which, if carefully examined, have already adopted this doctrine. Although this doctrine did not initially emerge in environmental cases, it is indeed suitable to be implemented in environmental cases, where it is often difficult to determine which party is truly responsible for the environmental damage that has occurred.
Through Article 46 paragraphs (4), (5), and (6) of Supreme Court Regulation Number 1 of 2023 on Guidelines for Adjudicating Environmental Cases (“Supreme Court Reg. 1/2023”), which provides as follows:
“(4) In determining liability in cases involving multiple perpetrators as referred to in paragraph (3), the presiding judge shall cumulatively consider the following requirements:
a. the loss suffered is caused by acts and/or substances that have the same function, physical characteristics, properties, or risks and cannot be distinguished from one another; and
b. the defendants possess dominant business capacity and/or have made a significant contribution to the occurrence of environmental pollution and/or damage.
(5) Where the requirements referred to in paragraph (4) are satisfied, the liability of the defendants shall be based on their respective contributions to the occurrence of environmental pollution and/or damage.
(6) A defendant may be released from liability as referred to in paragraph (5) only if it can prove that the environmental pollution and/or damage was not caused by its activities or by the waste it discharged.”
The existence of this regulatory framework demonstrates that Indonesian law has, in substance, facilitated a mechanism for addressing situations in which environmental harm has occurred but the specific party responsible cannot be clearly identified. When examined closely, these provisions are conceptually aligned with the core principles of market share liability, particularly in their emphasis on proportional responsibility and the shifting of the burden of proof to defendants.
Nevertheless, a critical question remains on how is the implementation of this doctrine and provision in Indonesia? Has the existence of this provision been effectively applied and truly helped in resolving issues of compensation and civil liability in environmental cases in Indonesia?
The doctrine of market share liability allows parties who may not be the direct perpetrators of the harm, and who may not have committed a specific fault, to nonetheless be held legally responsible for the losses incurred.
Implementation of Market Share Liability in Indonesia
Both the doctrine of market share liability itself and its regulatory recognition through Article 46 Supreme Court Reg. 1/2023, when assessed from the perspective of practical implementation, have not yet been fully realized. Although Supreme Court Reg. 1/2023 may be regarded as providing a sufficient normative foundation for the adaptation of market share liability, in practice, however, a lot of relevant parties remain unfamiliar with its application.
The doctrine of market share liability allows parties who may not be the direct perpetrators of the harm, and who may not have committed a specific fault, to nonetheless be held legally responsible for the losses incurred. Even though, in general, civil liability is premised on the existence of fault. In this sense, market share liability may be understood as creating an exception to the conventional fault-based model of responsibility. As illustrated in Sindell v. Abbott Laboratories, even though certain defendants could not be proven to have directly caused the plaintiff’s injury, they were nevertheless held liable in proportion to their respective market shares.
Moreover, the invocation of market share liability in a claim for damages has the immediate procedural consequence of shifting the burden of proof to the defendants. Consequently, liability will continue to attach to the defendants unless they are able to demonstrate that they were clearly not responsible for causing the harm in question.
Nevertheless, efforts to bring lawsuits by incorporating the market share liability doctrine in environmental cases in Indonesia has begun to be implemented, supported by the existence of Article 46 of the Supreme Court Reg. 1/2023. The following case illustrates one example of the implementation of the provisions contained in the Supreme Court Reg. 1/2023.
Romhan., etc. v. PT. Bumi Mekar Hijau, PT. Bumi Andalas Permai, and PT. Sebangun Bumi Andalas Wood Industries, Decision Number 87/PDT.Sus-LH/2025/PT PLG jo. 250/Pdt.G/LH/2024/PN.Plg
One of the claims in this case was based on Article 46 paragraphs (1), (2), and (3) of the Supreme Court Reg. 1/2023, where the plaintiffs brought a claim against three corporate entities, all of which held Industrial Plantation Forest Utilization Business Licenses (IUPKH-HTI). It was established that, over the course of their business operations between 2001 and 2020, the total area affected by fires within the defendants’ concessions reached approximately 473.000 hectares, representing about 92% of the total burned area within the Sugihan River Lumpur River Peat Hydrological Unit (Kesatuan Hidrologis Gambut Sungai Sugihan Sungai Lumpur/KHG SSSL) in South Sumatra Province. Whereas the recurrent fires were recorded in at least 175.000 hectares of this area.
Although the plaintiffs primarily based their claim on the doctrine of strict liability, they also based their claim on Article 46 of the Supreme Court Reg. 1/2023 as a legal basis for their claim. In their response, however, the defendants essentially contended that, as companies engaged in forest utilization, they had conducted their business activities in full compliance with the licensing regime and the applicable laws and regulations.
In its legal consideration, while the Panel of Judges referred to Supreme Court Reg. 1/2023 as a general guideline for adjudicating environmental cases, the Panel of Judges did not specifically address the application of Article 46. Moreover, at the first instance level, the court declared the plaintiffs’ claim as inadmissible, and even subsequently at the appellate level.
While the claim is declared inadmissible, there is an important point that can be taken from the lawsuit. However, what is indeed regrettable is that the plaintiffs, in their claim, did not elaborate further on Article 46. Had this provision been further developed and more closely linked to the factual circumstances, it would have been possibly relevant to be implemented. Moreover, in its consideration, the court’s decision to declare the claim inadmissible was based on the absence of a necessary party, namely the government. While it is indeed reasonable that the government may also be sued and held accountable in environmental cases, the central purpose of invoking Article 46 of the Supreme Court Reg. 1/2023 lies in directing claims for compensation primarily against the business actors whose activities are alleged to have contributed to the losses.
While as of now the case remains pending at the cassation stage, it is nevertheless important to examine in depth one of the basis claims relied upon by the plaintiffs, namely Article 46 of Supreme Court Reg. 1/2023. Whereas this lawsuit constitutes one of the early cases that has begun to incorporate Article 46 of Supreme Court Reg. 1/2023, which reflects the implementation of the market share liability doctrine.
The doctrine of market share liability holds the potential to be implemented in environmental litigation in Indonesia, although its implementation will remain challenging.
The Role of Market Share Liability in Determining Liabilities in Environmental Cases
When referring back to the use of the market share liability concept in the environmental litigation discussed above, it becomes evident that, while it would not be easy, this doctrine is not impossible to apply in cases involving disasters or environmental damages, such as those that have occurred in Sumatra. Although it may appear easier to assess liability by mapping land and forest areas according to the industrial activities carried out by business actors, in practice, it remains difficult to determine which party should truly liable and be required to provide compensation for the severe environmental damage that has occurred.
While the provision under Article 46 of the Supreme Court Reg. 1/2023 is relatively new and the market share liability doctrine remains unfamiliar in practice in Indonesia, this does not mean this theory will be impossible to implement. With well-formulated arguments, this provision and doctrine can be effectively implemented. At the same time, judges will also need to become more familiar with this concept of liability, particularly in complex environmental cases involving multiple contributors to the harm.
Ultimately, the doctrine of market share liability holds the potential to be implemented in environmental litigation in Indonesia. Nevertheless, its implementation will remain challenging. Moreover, as environmental harm becomes increasingly linked to the industrial activity, the adoption of market share liability would not only be relevant, but also necessary to ensure effective access to justice and meaningful environmental accountability.
Author
Miskah Banafsaj is an associate at Leks&Co. She holds a law degree from Universitas Indonesia. Throughout her studies, she was actively involved in student organizations and participated in various law competitions. She has also previously worked as an intern at several reputable law firms. At this firm, she is involved in doing legal research, case preparation, and assists with ongoing matters.
Editor
Dr Eddy Marek Leks, FCIArb, FSIArb, is the founder and managing partner of Leks&Co. He has obtained his doctorate degree in philosophy (Jurisprudence) and has been practising law for more than 20 years and is a registered arbitrator of BANI Arbitration Centre, Singapore Institute of Arbitrators, and APIAC. Aside to his practice, the author and editor of several legal books. He led the contribution on the ICLG Construction and Engineering Law 2023 and ICLG International Arbitration 2024 as well as Construction Arbitration by Global Arbitration Review. He was requested as a legal expert on contract/commercial law and real estate law before the court.
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Reference:
- Law Number 41 of 1999 on Forestry;
- Law Number 18 of 2013 on the Prevention and Eradication of Forest Destruction;
- Supreme Court Regulation Number 1 of 2023 on Guidelines for Adjudicating Environmental Cases;
- Sindell v. Abbott Laboratoris;
- Palembang High Court Decision Number 87/PDT.Sus-LH/2025/PT PLG
- Palembang District Court Decision Number 250/Pdt.G/LH/2024/PN.Plg.
- Forest Declaration Assessment 2025.
- BNPB, Rekapitulasi Penanganan Darurat Banjir dan Longsor Provinsi Aceh, Sumatera Utara, dan Sumatera Barat Tahun 2025, Rekapitulasi Terdampak Bencana, gis.bnpb.go.id/bansorsumatera2025/.
