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Understanding ‘Omnibus Law’

The Indonesian Government appears to have doubled down on implementing the concept of ‘omnibus law’ as a powerful instrument to cut through red tape and make effective new regulations deemed necessary to improve the investment climate in Indonesia. This new focus was announced by President Joko Widodo during his inauguration speech last October, where he stated that the concept would be used to simplify current regulatory challenges, specifically citing two new so-called ‘omnibus laws’, one focused on employment (UU Cipta Lapangan Kerja or the Job Creation Law), and the other on small to medium enterprises empowerment (UU Pemberdayaan UMKM). It may not stop here, as concerned stakeholders have also started discussing omnibus laws for tax and other financial regulations to improve state financing and the business and investment climate. It is useful to note here that, reportedly, up to November 2019, President Joko Widodo’s Government had issued 10,180 regulations, composed of 131 laws, 526 government regulations, 839 presidential regulations, and 8684 ministerial regulations.

The term ‘omnibus’ is derived from the Latin language with the meaning ‘for everything’. So in general, an omnibus law bill is a single bill that may include separate and diverse legal matters but will be processed by legislature as a single document. The main argument for omnibus bills would be that, where lawmaking is concerned, the process is therefore ostensibly simplified and made more efficient. The concept of the omnibus law itself appears to have particularly developed in the common law realms, with notable instances of when the concept is used. This notability is because omnibus law potentially runs counter another important legal concept that is used in many jurisdictions, namely the single-subject rule, which stipulates that legislative processes may only focus on one matter at a time. This rule is used to avoid two main problems, firstly the complexity that may arise when one single matter is legislated in different legislative products, and secondly to avoid the ‘rider’ problem, which is a situation when legislators insert an unpopular provision amongst other popular provisions, a kind of Trojan Horse tactic that may be used by regimes in times of heavy political infighting.

In addition to President Joko Widodo’s push for omnibus law as an instrument for efficiency and simplification in lawmaking, BAPPENAS (the National Development Planning Agency) and the Directorate General of Taxes of the Ministry of Finance have also opened discussions on the need to take the omnibus law approach due to the complexity of their respective mandates, where omnibus laws could arguably be considered ‘surgical strikes’ that can address different challenges in one document.

The President’s frustration with the complicated legislative process in Indonesia, which is perceived to be a barrier to investment especially and growth and prosperity generally, is understandable. At this point, it becomes important to look deeper into the potential difficulties that may arise from using, or abusing, the omnibus law concept, as hinted above. The fact that President Jokowi just won his second presidency in the recent presidential election does not mean that he controls the DPR in the law-making process. Regardless the real intention of President Jokowi for letting the DPR push for the new and problematic KPK Law, which proved that he may not be in control of his own supporting political parties, the concept of issuing omnibus laws in one go may be deemed as a more effective process than dealing with the DPR for each bill on one particular issue in the legislation process.

Omnibus Laws in Indonesia: Problematic?

The first main challenge to implementing omnibus laws in Indonesia is that our legal system doesn’t recognize such a concept; that is, it is an entirely new concept from an Indonesian lawmaking perspective. In an interview with Hukumonline.com, 1 Jakarta LBH (Legal Aid Agency) Director Arif Maulana argued that the omnibus law has no legal basis in Indonesia, not being a lawmaking instrument or process provided for in Law No. 12 of 2011 on the Formation of Legislation as amended by Law No. 15 of 2019. He further clarified that the use of the omnibus law concept is problematic for three main reasons: firstly, the aforementioned lack of provision by the Law on the Formation of Legislation, especially considering that the Employment Creation Law Bill will potentially revise more than 70 existing laws, including the crucial Manpower Law; secondly, the planning that has been done so far regarding the omnibus laws are perceived to be done in a rushed and hushed fashion, lacking public participation or even awareness; thirdly, there may be constitutional challenges to the Employment Creation Law Bill.

The first and second problems listed above reflects the main issues recognized to be the reasoning behind the single-subject rule mentioned above: although the omnibus law approach may improve the simplicity and efficiency of the lawmaking process, this does not guarantee a simple and efficient implementation of the law, especially when the omnibus law affects 70 other pieces of separate legislations. Further, the rider problem is indicated to be much more sinister in Indonesia, where legal uncertainty and corruption problems are unfortunately still very much a part of the fabric of life. Business practitioners know that it is not simply because of over-regulation that the investment climate in Indonesia suffers in comparison to other economies in the region; the lack of legal certainty and the high cost of operations due to corruption, rent-seeking, and industry mafias play their own very prominent roles. In this light, it is important to ask the question, for whom exactly is the omnibus law concept beneficial? Is it possible that omnibus laws are only expedient and efficient up front for legislators and the regime to be able to say that they have passed laws, while the problem of implementation will ultimately be borne by the public as ultimate users of law products? If it is true that the omnibus law approach is intended to be for the good and prosperity of the Indonesian people, then it is important for the Government to heed recommendations from law reform experts on how to implement the concept properly.

Criticisms and Recommendations from Law Reform Experts

The first red flag that has alarmed the Indonesian law reform community is the apparent secrecy and speed with which legislators have moved with regards to the omnibus laws; not too long ago, student demonstrators rocked a number of Indonesian capital cities to protest a number of DPR’s problematic laws, and that nuance of problematic lawmaking is something that the Government should attempt to avoid, by ensuring that steps are taken to make sure that public participation is done in a correct manner.

Law reform experts have a number of specific criticisms in regards the Government’s apparent pre-occupation with easing investment, potentially at the cost of upending prevailing rules and regulations,2 the Center for Law and Policy Studies (Pusat Studi Hukum dan Kebijakan, “PSHK”) is especially critical of the way the omnibus law approach has been adopted by the Government in order to improve employment conditions and stimulate small to medium enterprises, because the lack of public participation in this approach is indicative that the Government and legislators are prioritizing ease of investment over other principles, namely principles important for democracy such as protecting human rights, anti-corruption, ally-ship with marginalized groups, and environmental conservation, which all need to be considered at every step of any lawmaking process. At the very least, the omnibus law approach should be carried out by the Government’s planners and lawmakers in a manner compliant with the Law on Formation of Legislation, which among other things must involve appropriate public participation. Merely announcing such legislative plans does not make a strong good faith impression that public participation is high on the Government’s list; instead, lawmakers should initiate discussions with the public, especially law reform experts of known track records and integrity, and if this is not done, then President Jokowi’s regime should urge DPR to do so.

Another point raised by PSHK and other law reform-oriented organizations is that law reform experts are somewhat excited at the prospect of Indonesia taking the omnibus law approach in an appropriate and serious manner. As an instrument of lawmaking, it is neutral and should be apolitical, and therefore could be used in the ideal manner of addressing various legal products in one legal document in order to achieve a particular social goal. This is a challenge that the Government and DPR should attempt to surmount with the utmost care and integrity. 3 The public should demand that the Government and DPR provide such safeguards in its approach to use omnibus law. These safeguards should ensure that the objectives of omnibus laws shall remain only amendments, revocations, or enactment of facts that are related, but separated under various legislations, in order to ensure that the simplification and efficiency goals of omnibus laws are maintained. Even then, the process should also include safeguards that ensure that the rider problem does not occur, that is, to avoid omnibus laws being used in order to ‘smuggle’ unpopular provisions in a massive list of popular ones. In order to be able to make such effective safeguards, both the Government and DPR will need to carry out relevant regulatory mapping, both vertical and horizontal, considering the philosophical and sociological basis of all revised laws that are targeted by the omnibus laws, revoking all existing provisions that are in conflict with it, while being in full compliance with the Law on Formation of Regulation. Only with such safeguards can the omnibus law approach respect the vital importance of legal certainty in Indonesia.

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